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Housing Australians @ 25 million

Population growth is a positive for the housing industry and more years of stable housing supply are needed to make up the historical shortfall in supply.

Author

Harley Dale

Australia’s population officially reached 25 million people on 7 August 2018. The rate of Australia’s population growth will always be a topic of debate, mostly for politicians, but also for everyday Australians who can feel unsettled by the rapid pace of change.

For the housing industry, population growth presents a positive story – supporting demand for new housing and providing an additional resource for many Australian businesses.

The Australian Bureau of Statistics recently released new information regarding Australia’s population growth to the end of 2017. The results show why we might feel that things are changing faster than expected.

A moving target

In 2002, the first Intergenerational Report estimated that Australia would reach a population of 25.3 million in 2042. Just five years later, the 2007 report suggested this target would be reached in 2027, 15 years earlier. By the time of the 2010 report, our population was already up to 22 million and the estimate of 25.7 million people was now expected in 2020, a further seven years earlier. The most recent report, released in 2015, put Australia’s population at 23.9 million, and retained the expectation that the milestone of 25 million people in Australia would be reached in the ten-year window between 2015 and 2025.

Clearly growth has occurred much faster than the experts predicted back in 2002. The latest Intergenerational Report now predicts Australia’s population will reach 39.7 million by 2055.

The current reality

In 2017 Australia’s population grew by 1.59 per cent to a level of 24.77 million people. As expected population growth was dominated by net overseas migration (NOM). In 2017 there were 252,400 migrants to Australia. This figure includes temporary and permanent migrants and the three classifications of humanitarian, family and skilled migrants.
Following the 2016 census conducted by the Australian Bureau of Statistics, a new base level was established for population estimates, which has led to the numbers being revised.

Two elements to these revisions are important to note:

• population growth over 2016 and 2017 was faster than initially thought
• the revisions provide a different trajectory for population growth.

Prior to the revisions the understanding was that Australia’s rate of population growth continued accelerating through to the September 2017 quarter. The revised figures highlight a peak in the growth rate at the start of last year after which the pace has slowed.

HIA considers there are clear economic benefits to a well-designed and implemented immigration policy

Reasons for the recent slowdown

The earlier peak in Australia’s latest population cycle indicates a slowing in the population growth rate, which taken in isolation is a negative for housing demand. This slowdown is occurring at the same time as Australia is losing its competitive edge in attracting skilled migrants. One factor is the sustained, strong recovery in the US economy, as well as relative improvements in economic conditions in the EU, Canada and New Zealand.

Changes were made by the federal government in 2017 to skilled worker visas (a form of temporary visa that can lead to permanent migration). This is already seeing a reduction in the amount of skilled-labour workers choosing to move to Australia.

In a significant difference to the policy introduced by the Labor government almost a decade ago, the annual cap of 190,000 people on permanent migration is not binding. The government can now choose to issue fewer visas than this number per year. In 2016/17 there were 183,608 permanent migrants. Figures released in late July revealed that in 2017/18 this number dropped to 162,417.

Another factor in the slower growth is that the mini natural population boom Australia experienced in the 2000s after the Howard government introduced the Baby Bonus has completely run its course.

Implications for housing

Despite the slower growth, the population continues to rise. For many years there has been no nationally coordinated strategic response from state and federal governments to the steady boom in population. Housing, infrastructure and other services like health and education are not keeping up. As a consequence resources remain stretched to varying degrees across our major cities. For most Australians, this reality is what impacts their day-to-day lives – the pressure of more people living in our cities and relying on the existing infrastructure and services.

A focus by the states on supporting higher levels of housing supply has been evident in recent years with supply meeting demand for the first time in many decades. However, many more years of stable supply are needed to make up the historic shortfall and reach a true equilibrium.

At HIA’s National Policy Congress in May, members recommitted to supporting a measured approach to immigration and hence population growth, adopting a revised policy position on population and immigration.

Reaching the milestone of 25 million Australians will bring additional attention to population issues, and the public focus is expected to remain strong in the lead up to a federal election, this year or next. There are clear economic benefits to a well-designed and implemented immigration policy.

In summary: HIA’s policy position on population and immigration

• Australia should promote and maintain a population growth rate sufficient to secure ongoing growth in Australia’s economic performance, workforce capacity, national productivity and standard of living. To this end, it follows that caps and limits need not be placed in categories such as skilled and business migration.
• Australia’s population growth policies should target working-aged skilled migration and business migration so as to mitigate the rate of decline in the proportion of our working-aged population compared to those aged 65 and over.
• HIA supports a managed migration program that delivers adequate skilled migrants in construction and building professions and trades to meet Australia’s ongoing housing needs.
• For the residential building industry, employer sponsorship rules should be contemplated that allow industry groups to sponsor contractors in the residential building industry.
• The residential building industry should be consulted in the development of skilled migration programs to provide guidance on the verification of overseas skills, licensing and qualification benchmarks.

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