Australian house prices may contain a migration premium of between 3 and 15 per cent, according to new research that finds the major official population and housing forecasts all assume sustained migration but do not examine a future in which artificial intelligence materially lifts productivity and reduces the economy’s reliance on population growth.
The study, the sixth report in The Balance Sheet research series, examines the population assumptions used by the Intergenerational Report, the Centre for Population, the National Housing Supply and Affordability Council, Infrastructure Australia and state planning documents. Each projects net overseas migration of around 235,000 people a year over the long term, leading to a population of about 40.5 million by 2062-63.
The report identifies one official alternative. The Australian Bureau of Statistics publishes a zero-migration projection series alongside its main scenarios, although it notes the series “does not feature in the commentary and analysis”. The report concludes that none of the major official forecasts it examined models a future in which migration falls while artificial intelligence materially lifts productivity.
The link between migration and housing demand comes directly from Commonwealth Budget estimates. The latest Budget calculates that an additional 55,000 migrants require about 22,000 extra dwellings, equivalent to one home for every 2.5 people. On that basis, annual migration generates demand for about 94,000 dwellings, representing between 55 and 60 per cent of all new housing demand. Recent ABS figures show annual dwelling completions running at about 172,000 homes, well below the pace required to meet the National Housing Accord target of 240,000 homes a year. The Accord’s 1.2 million-home target is now expected to be reached around September 2030 rather than the original June 2029.
More than 70 per cent of recent migrants rent during their first three years in Australia, concentrating much of that demand in the tightest segment of the housing market.
Using published estimates from the Reserve Bank, economist Peter Tulip and the Grattan Institute, the report estimates Australian housing may contain a migration premium of between 3 and 15 per cent over a decade, depending on long-run migration assumptions, with an illustrative midpoint near 10 per cent. It stresses that this is a modelled estimate rather than an observed market value.
Against those long-term assumptions, the report examines the evidence on artificial intelligence and productivity. It finds forecasts ranging across almost two orders of magnitude. Goldman Sachs estimates AI could lift labour productivity by about 1.5 percentage points a year over a decade, while MIT economist Daron Acemoglu estimates closer to 0.07 percentage points. The Productivity Commission’s Australian estimate sits between them, at roughly 4.3 per cent over a decade, equivalent to about $116 billion in additional GDP.
Population growth currently contributes about one percentage point a year to Australia’s economic growth. At the upper end of current estimates, AI could offset that contribution entirely. Under the Productivity Commission’s estimate it would replace about one-third of it, while Acemoglu’s work suggests only a small effect.
“Output is no longer constrained solely by the number of working-age people,” the report says. “When software performs cognitive tasks and robotics perform physical work, productive capacity can expand without equivalent labour-force growth.”
The report argues that possibility deserves greater attention in long-term housing analysis.
“Higher productivity does not automatically reduce migration; governments may choose to pursue both simultaneously,” it says. Instead, the report asks whether sustained high migration remains economically necessary if AI materially lifts output per worker. It frames the question simply: if Australia could produce the same GDP with one million fewer additional workers, what would happen to housing demand, rents, bank lending and land values?
Four scenarios are examined, none presented as forecasts.
In the scenario where migration halves and AI doubles productivity growth, annual housing demand falls to about 129,000 dwellings. The current housing shortage narrows materially, vacancy rates improve and rents finish between 3 and 11 per cent lower over a decade, while stronger household incomes partly offset downward pressure on dwelling prices. The same scenario reduces growth in university fee income, state stamp duty and the GST pool, all of which are closely linked to population growth.
Construction emerges as one of the report’s central case studies.
Australia’s dwellings completed per hour worked have fallen 53 per cent since the mid-1990s. At the same time, Perth company FBR’s Hadrian X robot can lay up to 500 blocks an hour, roughly matching a bricklayer’s daily output, and is now being commercialised in Florida rather than Australia. Prefabricated construction accounts for about 4 per cent of Australian housing compared with around 84 per cent in Sweden.
The report argues the comparison suggests Australia’s housing constraints are becoming increasingly institutional rather than technological.
It also examines whether AI could weaken the long-established relationship between ageing populations, government borrowing and money creation by lifting productivity, company profits, wages and tax revenue.
Current modelling suggests only a modest effect. Research from the Penn Wharton Budget Model estimates AI would reduce long-run US fiscal deficits by about 0.3 per cent of GDP a year.
“On current modelling, AI slows the debasement machine; it does not stop it,” the report says.
A full section is devoted to the counter-case.
The report notes AI could create new labour demand rather than replace workers, while sectors such as aged care remain heavily dependent on people, with around 40 per cent of nurses and carers in aged and disability services born overseas. It also notes that AI made almost no measurable contribution to US GDP growth during 2025, while a future combining higher productivity with continued strong migration could lift housing demand and prices even further.
Accordingly, the report rates migration’s role in housing demand as high confidence, but the proposition that AI materially reduces migration as medium-low confidence.
Its conclusion focuses on risk rather than prediction.
“Australian housing is a leveraged position on one demographic future,” the report says, referring to households carrying debt equivalent to about 114 per cent of GDP. It argues Australia’s long-term housing analysis has overwhelmingly focused on migration and interest rates, while artificial intelligence has received comparatively little explicit attention.
The report does not argue existing population forecasts are wrong. Rather, it suggests Australia’s long-term housing and fiscal planning would benefit from testing a low-migration, high-productivity scenario alongside existing assumptions.
“The asymmetry, not any forecast, is the risk.”
Among the areas identified for future research are a formal low-migration stress test of Australian bank mortgage books, Australian fiscal modelling comparable with work undertaken in the United States, and an examination of why Sweden has embraced factory-built housing while Australia has not.
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