New economic modelling suggests that eliminating migration to Australia for a decade would leave house prices 2.3% higher by the mid-2030s than they would otherwise be, contradicting claims that cutting immigration would ease the housing crisis.
The analysis by KPMG, conducted as a thought experiment, found that a decade without net migration would reduce population growth to around 0.4% a year, resulting in 29 million residents by 2035 instead of the projected 31.2 million. However, the smaller labour force would make it harder to build homes, outweighing the reduction in housing demand and pushing prices up.
KPMG chief economist Brendan Rynne said the modelling indicated that “pulling back population growth to just natural increases for the next decade is not a great outcome for Australia”. The economy would be 2.4% smaller than in a migration scenario, while wages would rise 7.5% and unemployment would be 0.2 percentage points lower.
Rynne warned that with Australia’s fertility rate at 1.6 children per woman, below the replacement level of 2.1, the population would eventually begin to shrink, risking the kind of economic stagnation seen in Japan and Italy. The modelling also showed the federal budget deficit would widen to A$87bn by the mid-2030s, with total debt surpassing A$2tn by June 2035 — A$437bn more than if migration continued as expected.
The findings come amid heightened sensitivity to migration in Australia. A JWS Research survey from November last year found 78% of Australians believed housing access and affordability was a “national crisis”, while 67% supported reducing the migration intake to ease pressure on the housing market.
