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In the years before the COVID pandemic, Australia allowed around 250,000 immigrants into the country each year, with the annual figure varying from around 200,000 to 260,000 depending on workforce requirements.

In the year 2022-23, the Albanese Government allowed this figure to more than double to 518,000, as a direct result of policies adopted by the Jobs and Skills Summit held a few months after Labor came to power.

The Jobs and Skills Summit lifted the cap on permanent immigrants and also opened the floodgates to temporary visa applications, by offering hundreds of thousands of free or low-cost TAFE places, as well as permitting an expansion in the number of paid-fee places for entry into Australian universities.

The results were predictable. The number of people coming to Australia on temporary visas – mainly students and temporary workers – jumped by 554,000 people, putting intolerable pressure on the housing sector, which had suffered seriously during the COVID pandemic and the ensuing inflation.

Historically, Australia’s housing industry has built around 150,000 new homes every year. Because of the long lead times for home construction – from securing building approvals to finding contractors through to occupying the new home – and the limited supply of building products, the supply of new homes is relatively inelastic. New home completions actually fell during and directly after the pandemic.

The 150,000 figure is substantially higher than the net figure of housing stock nationally, because it includes replacement of existing houses. More houses are required to accommodate both natural population increase and immigration.

The housing shortage coupled with rising interest rates have had three immediate consequences: prices of land accelerated above the inflation rate; house prices have risen sharply; and rents have gone through the roof. These factors have contributed to the lack of affordability of housing, particularly for first-home buyers.

While inflation has contributed to this, the main factor is undoubtedly the huge increase in demand for housing, driven by the uncontrolled immigration – which more than doubled in a single year.

Half-Measures

It is now clear that the Government eventually realised that its policies had gravely aggravated the housing crisis. So, in the 2023 Budget, it announced that in the following year, immigration would be reduced to a more manageable 395,000 – still far above Australia’s long-term average of around 250,000 people.

Yet, the Government did nothing to reduce the number of temporary visas. Entirely predictably, the actual number of visas issued in the last financial year was far above the government’s 395,000 target.

The Australian recently estimated that the actual figure for new arrivals for 2023-24 would be 100,000 more than the Government estimated, nearly 500,000. The actual number will be released by the Bureau of Statistics in December.

This in turn suggests that the number of people coming into Australia in 2024 will be far above the long-term average, and that the combination of shortages in housing supply and inflation in house prices will continue well into 2025, if not beyond.

This presents the Government with a political problem, particularly going into an election year. Its solution is to appear to be doing something to resolve the problem, without ever admitting that the housing crisis is one of its own making.

Stymied Solutions

Labor’s flagship housing policy, unveiled before the 2022 election, promised a shared-equity scheme under which Labor will co-purchase a home with an eligible buyer, reducing the amount needed for a deposit.

The plan was to assist 10,000 Australian low-income earners into homes co-owned with the Government annually.

The problem was that legislation to fund Labor’s Help to Buy scheme has been blocked in the Senate by an unlikely combination of the Coalition – who believe that it will push up house prices – and the Greens – who are capitalising on Labor’s failure to freeze prices on rental accommodation, a move which would almost certainly be unconstitutional, as well as ineffective.

The only advantage for the Albanese Government is that it can use the stalled legislation to blame the Coalition and the Greens for the entire housing crisis. A credulous public, unaware of how the crisis has come about, might swallow it.

Additionally, Labor has announced hard caps on student enrolments at universities, clearly designed to reduce pressure on the housing sector. The problem here is that the universities, which have been short-changed by governments for years and rely increasingly on privately funded international students, fiercely oppose a plan which will substantially curtail one of their major sources of income.

The year 2025 will tell us whether Labor will retain the confidence of the Australian people.

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Republished with thanks to News Weekly. Image courtesy of Adobe.