Government didn't slash high immigration rate to improve housing affordability: Judith Sloan

The federal government’s much-hyped budget measures to improve housing affordability completely skirted the topic of its large immigrant intake which affects home prices, according to a senior journalist.  

The Australian’s Judith Sloan said while the Treasurer Scott Morrison said before the budget that social housing and renters would be a focus of the affordability measures,  the budget failed to address the fact that rapid population growth causes a housing price surge as supply fails to keep up with demand.  

The much-awaited housing affordability package was “just too meagre to warrant the big sell”, says Sloan. 

A recent op-ed piece by Michael Sukkar, Assistant Minister to the Treasurer, about the government’s measures was “feeble” she says.

The government has said it will free up some Defence land for housing, has tasked Treasury to set up the National Housing Finance and Investment Corporation which will operate an affordable housing bond aggregator.  

A first home super saver scheme will allow voluntary superannuation contributions of $15 000 per annum and cumulative maximum of $30 000 in total (per person if in a couple) for first home buyers. 

Others such as concessions for wealthy retirees to downsize and penalties for foreign investors if they left their houses vacant were too meagre, she says.

Property Observer had earlier reported that there had been mixed reactions to the budget's housing measures. 

“The list may seem long but the impact on housing affordability will be negligible and the government knows that,” says Sloan. 

In reality, most of the real determinants of housing affordability are not controlled by the federal government: land release, planning and development approval processes, interest rate policy and availability of credit. 

However, it does control migration, and that lever can impact housing prices simply because of the demand-supply equation.  

Sloan said there had been no change to the migration numbers under the skilled and family reunion categories. Australia will take in 190,000 a year for the coming financial year and in the next three. 

She says there was no mention of this fact in the budget papers and it “was an attempt to hide this fact”.

Sloan likens Immigration Minister Peter Dutton to a tough cop when it comes to certain immigrants. 

“But we are effectively being asked to look over there — we are deporting a few hundred failed asylum-seekers — while the large-scale immigration program is simply allowed to roll on without adjustment,”  says Sloan. 

At 190,000 a year, immigration now makes up more than half of our population growth, and Australia has one of the highest rates of population growth among developed economies.

In fact, Australia’s population growth of almost 1.7 per cent is more than double the growth rate of many other countries, including Germany and the US.

“So why wouldn’t the government make the obvious call and reduce this number, particularly as this would have given substance to the claim that the pressing issue of housing affordability is being ­addressed?,” she asks. 

Among the reasons is Treasury’s advice to the government that reducing the number of immigrants would hit GDP growth, but the real measure that should be considered is GDP per head of population and it is not at all clear that high rates of immigration are associated with growth in the preferred figure.

While Australia hasn’t had a recession in more than 25 years, the story for GDP per capita is different. 

“There have been at least two episodes in the past 25 years when we have experienced technical recessions in GDP per capita (two successive quarters of negative growth).” 

Another reason was the lobbying by the business sector to keep the numbers high.  

“After all, if your firm is in the game of property development… what’s not to love about high immigration?,” she says.

Then there are the firms that find it easier to recruit migrant workers than train up the locals, says Sloan.

Also, for universities to sell “overpriced degrees to overseas students, it is necessary to be able to offer the byproduct of permanent residence for graduates,” argues Sloan. 

Any reduction in immigration numbers would make that sell harder and she says there was likely a bit of “wink-and-nod” between the government and the vice-chancellors on this topic. 

If the government really wanted to show its commitment to improve housing affordability, it would have slashed the migration programme numbers, but vested interests had their way, Sloan concludes.