We are probably two-and-a half years into what will become the last decade of ‘free’ migration.
Sometime in the next decade, countries will be competing for international migrants by offering financial incentives. That could be in the form of lump sum relocation bonuses, a year or two without paying full (or even any) tax, and probably even a migrant-specific first home buyer incentive.
Some background
In 1971, the Australian population was 12.5 million people.
In 2021, the Australian population hit 25.5 million people – effectively doubling in 50 years.
If you study the numbers a little closer, what happened is that the Australian population increased by one million people every five years between 1971 and 2006.
Then, from 2006 onwards, our population started growing by twp million people every five years.
Why?
In the early 2000’s it dawned on our government that we had an ageing population. Our biggest ever generation, the Baby Boomers (born between 1944 and 1964, aged 40 to 60 at the time), were approaching retirement age.
With our free healthcare system and six out of seven retirees needing the pension, this presented a problem; we were going to have fewer and fewer taxpayers for every pensioner and retiree.
So, from the mid-2000’s, Australia started to aggressively chase overseas migration.
Of the two million people increase seen in Australia every five years since 2006, 750,000 of those has come from a surplus of births over deaths, and the other 1,250,000 has come from overseas migration.
For the last two years, our international borders have been closed, so we haven’t taken any overseas migration. A significant setback for the taxpayer to pensioner ratio.
But that’s all about to change.
Our unemployment rate is 3.5 per cent today – the lowest seen since 1975.
What’s more, there is one- job being advertised for every one unemployed person in Australia.
Our government needs to open international borders again; we need the people to fill jobs, but more importantly, we need the taxpayers to replace our ageing workforce.
The catch is that Australia isn’t alone in facing the problem of an ageing population. It’s a global trend with most developed countries around the world grappling the challenging math problem of having less and less taxpayers for every pensioner. No countries offer financial incentives yet, so places like Australia have a natural advantage, for now, in attracting more overseas migrants than other countries.
The reality is Australia has more motivation than most countries to chase overseas migration.
We have five per cent of the world’s land mass, but just 0.33 per cent of the world’s population. We also offer one of the more generous (and therefore expensive) public healthcare and pension systems in the world.
What does it all mean?
At some point in the next few years, we will see the dam walls released and an explosion of population growth into Australia.
We have already seen early signs of it. Australia has received one million visa applications since the pandemic started. Because we have a strong economy, one of the best climates and healthcare systems in the world, Australia is a popular destination of choice for migrants.
That’s the big picture, beyond the short-term noise around inflation and interest rates.
There are forecasts out there that the Australian population could hit 40 million by 2040 and 75 million by 2075.
With population growth, comes demand for housing.
The short-term problem is we don’t have enough housing.
I’m sure the government is grappling with that conundrum right now.
Keep borders shut and you risk hyperinflation from surging wage growth.
Open up borders and keep inflation in check, but you will see house prices and rents surge again.
Regardless of where you stand on what’s the right or wrong thing to do, with a vacancy rate of less than one per cent today, I think Australian housing is as safe a bet as any asset class over the next decade.
An even safer bet is land.
Not because of inflation or interest rates, but because of the relationship between supply and demand.
With population growth comes demand for land and housing, the former being a finite resource that we can’t make any more of.
