Australia’s population increased by a massive 563,000 people in the 12 months to the March Quarter. This represents a population growth of 2.2%, with 454,000 coming from overseas migration. To put this in perspective, the average immigration intake is around 180,000 people per annum. In terms of raw numbers, this is by far the highest rate of immigration intake in Australian history.
Looking forward to the July data, the growth is accelerating, and the total immigration number will likely top out over 500,000 people or around 270% of the long-term average. This would bring the total population growth to 2.5%, the fastest pace in nearly 60 years. Much of this is a response to the outflow of people during the pandemic, and the increase in immigration will help boost the GDP numbers, making the government look good. However, if we were to look at GDP per capita, it’s falling, and it’s clear that we’re in a per-capita recession. That is to say, the average Australian is not experiencing an improvement in living standards despite a rising national GDP number. This is deflationary and, in a roundabout way, is a necessary evil at this point in time if we want to see interest rates fall.
Additionally, the increase in immigration is likely to fill up some of the labour shortages we’re currently experiencing. We should see this flowing through in the data through higher unemployment rates. Again, while it sounds terrible, this will be the catalyst to bring down the interest rates, which will mark the beginning of the next property boom.
Where are all these people going?
If we look at the raw numbers, most immigrants have traditionally moved to NSW and VIC, with the vast majority choosing to settle in the capital cities. This time is no different, with around 65% to 70% choosing the largest two capital cities. This is largely because most jobs, universities, and business opportunities are in the big cities. With building approvals already down, this has and will continue to pressure the rental market in these locations. Another observation that is clear is that there appears to be a flow of people from NSW to QLD. Presumably, many of these will be retirees looking to free up some of the capital locked in their family home and buy something cheaper in the warmer Queensland climate.
However, if we were to divide the components of annual population growth by the population of each state/territory and look at the same graph again, we would see that WA and ACT receive virtually identical levels of overseas migrants to NSW and VIC relative to the local population.
While all the attention tends to fall on the bigger eastern states regarding the effect of immigration on the rental market (and ultimately property prices), what has been overlooked is that Perth faces the same pressure. It already has the lowest vacancy rates in the country and will almost certainly see faster rent growth than any other capital city over the course of this cycle.
The net effect on the population is clear when we look at the total population growth figures; over the last 12 months, Western Australia has experienced the fastest rate of population growth in the country (closely followed by Melbourne and Queensland). We should see this result translated into higher property price growth relative to other states over the course of this cycle.