Australia has for decades been a promised land for both short-term tourists and long-term immigrants. Yet, this growth in population presents a rather vexing dilemma, one that centres on bricks and mortar. Prominent economists and industry experts are having their say on the complexities of balancing housing, immigration, and the economy, and the picture is as colourful as Shane Oliver’s ties.
Shane Oliver, the Head of Investment Strategy and Chief Economist at AMP, recently noted that net immigration in Australia is running at an unprecedented rate of “in excess of 500,000 per annum.” His insights go beyond immigration trends, highlighting the resilient job market in the UK, the downturn in small business optimism in the U.S., and shifts in various economic indicators. His multifaceted commentary includes observations on short-term arrivals to Australia, which are on a path of recovery. Interestingly, while Indian tourists have bounced back above pre-COVID levels, the same cannot be said for visitors from China.
Yet, this deluge of humanity trickling into Australia brings with it a torrent of questions regarding infrastructure, particularly housing. As Tarric Brooker, a journalist and analyst, pointed out, Australia needs to add 201,000 new homes per year to adequately accommodate the inflow of immigrants based on average household sizes. But here’s the catch—only 146,000 homes were added according to the latest annual data. And let’s not forget about the growing needs of Australia’s existing residents. How will we house them?
Scott Phillips, CIO at The Motley Fool Australia, cuts to the chase on this issue. “The simplest, fastest, and most direct way to address housing affordability is to reduce (the growth in) demand,” he notes. A direct reduction in demand may not be a popular solution, especially considering the cultural and economic benefits that a growing population can offer, but it does present a straightforward answer to the complexities of the problem.
Oliver’s commentary also alludes to a growing sense of vulnerability among consumers, evident in the Westpac/MI consumer confidence figures. Higher rates and cost-of-living pressures are creating a climate of insecurity. He suggests that while mortgage holders are increasingly confident, the story is different for renters and others. In addition, unemployment expectations are on the rise, indicating a further softening in the jobs market, another layer to the housing issue.
While households, according to the Westpac/MI survey, are tending to favour less risky choices for their savings, like bank deposits and debt payment, they are also steering clear of investments in real estate, shares, and super. This suggests a general trend of caution, perhaps in response to the conflicting winds of economic factors.
Business confidence and conditions revealed by the August NAB survey further illustrate this divergence. While these indicators have seen slight increases, they remain below recent highs, indicating a somewhat wary outlook among businesses as they navigate the choppy waters of Australia’s economic landscape.
In a country defined by its vast landscapes and boundless opportunities, it seems that the issue of housing is being tightened into an ever-constricting knot. With growth comes challenge, and it will take more than economic punditry to untangle the complications of a nation on the move. Yet, for now, as the data pours in, Australians, both new and old, may find themselves wondering whether the national dream of home-ownership is slipping further away, carried off by economic currents too strong to withstand.
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