How high immigration is stopping Australians from reaching their full potential
Record-high immigration is fuelling by making Australians less productive at work and stopping them from owning a house, an economist says. Treasury is expecting a record 400,000 new migrants to have arrived in Australia in the year to June. Close to 1.5 million migrants, on a net basis, are expected to arrive in the five years as the likes of the Business Council of Australia, the lobby group for millionaire chief executives, pushes for high immigration. Australia's population last year grew by 1.9 per cent, among the highest in the developed world. AMP chief economist Shane Oliver said immigration-driven population growth was in fact making Australians less productive at work, because they often had to travel long distances to the office. 'Very strong population growth with an inadequate infrastructure and housing supply response has led to urban congestion and poor housing affordability which contribute to poor productivity growth,' he said. Weak productivity means companies are more likely to pass on costs to consumers to pay for higher wages, in turn keeping inflation well above the Reserve Bank's two to three per cent target. 'If wages go up four per cent and productivity growth is zero, business costs go up four per cent and they will pass this on to their customers likely resulting in inflation above the RBA's target,' Dr Oliver said. He also argued that high population growth meant investors were buying homes for capital gain, to take advantage of a housing shortage, instead of ploughing their money into new business ventures or shares. 'Increased speculative activity around housing diverts resources from more productive uses,' he said. Sydney's median house price of $1.334million is beyond the reach of an average, full-time worker earning $94,000. That's because a million-dollar loan with a 20 per cent mortgage deposit would give someone a debt-to-income ratio of 11 - a level well beyond the banking regulator's 'six' threshold for mortgage stress. Australia's wage price index grew by 3.6 per cent in June, down from an annual pace of 3.7 per cent in the March, marking the first annual drop since 2020. It remained well below the 6 per cent inflation rate and the 9.6 per cent increase in employee living costs, as calculated by the Australian Bureau of Statistics. This meant workers were effectively suffering a six per cent cut in real wages. Productivity growth has been stuck below one per cent for the past decade, a level well below the two per cent pace of the 1990s. Australia's annual net overseas migration level has consistently been in the six-figure range since 1999, excluding the Covid pandemic in 2020 and 2021, when skilled migrants and international students were included. Dr Oliver said unless productivity growth returned to 1990s levels, inflation would stay higher for longer, but feared both major political parties were reluctant to liberalise labour laws. 'After nearly two decades of policy drift, declining productivity growth is weighing on growth in living standards and sustainable real wages growth,' he said. 'The political will for the sort of economic reforms necessary (particularly around taxation and labour markets) for another 1990s style rebound in productivity growth looks unlikely. 'This in turn makes the RBA's job in getting inflation down a little bit harder and will constrain medium term investment returns.' The Department of Home Affairs has revealed how many applications were finalised during the first nine months of the 2022-23 financial year, compared with the same period to the end of March in 2021-22. The skilled migration category saw a 111.7 per cent increase, with the permanent intake rising to 144,040, up from 68,055. Student visa approvals, classified as temporary but long-term arrivals, increased by 154.4 per cent to 511,149, up from 200,941. Another set of data from the Australia Bureau of Statistics showed a net overseas migration pace of 387,000 last year, following the reopening of the border to migrants in December 2021. When 109,800 births were added, minus deaths, Australia's population grew by 496,800 to 26,268,359. Australia surpassed the 25million milestone in 2018 - 24 years earlier than predicted in Treasury's inaugural Intergenerational report of 2002. The 1.9 per cent population growth pace in 2022 was significantly higher than the American level of 0.4 per cent. Dr Oliver said the political pendulum had swung in a left-wing direction, away from market-based solutions, blaming 'the perceived failure of the baby boomer generation to do much about climate change and housing affordability'.