Eliminating migration for the next decade would leave Australian house prices 2.3% higher by the mid-2030s than if migration continued as expected, according to economic modelling by KPMG. The finding challenges the popular belief that reducing immigration would ease housing pressures.
The modelling, conducted for Guardian Australia by KPMG chief economist Brendan Rynne, compared a scenario of zero net migration over ten years with a base case of continued migration. Under the no-migration scenario, the population would reach 29 million by 2035 instead of 31.2 million, and the economy would be 2.4% smaller.
While wages would be 7.5% higher and unemployment 0.2 percentage points lower due to a tighter labour market, the reduced workforce would also hamper homebuilding. Rynne explained that lower demand for housing would be overwhelmed by a drop in construction workers, pushing prices up. Higher wages would also fuel inflation, eroding real income gains.
The budget would suffer significantly, with the deficit widening to $87 billion by the mid-2030s instead of approaching balance. Total debt would exceed $2 trillion by June 2035, $437 billion more than under continued migration. With Australia's fertility rate at 1.6 children per woman, below the replacement rate, the population would eventually shrink, risking economic stagnation similar to Japan and Italy.
Rynne noted that while the outcome would not be 'diabolical' in the short term, losses would widen over time. He emphasised that a well-managed migration program does more economic good than harm, particularly in an ageing society with productivity challenges.
