Is Big Australia a big mistake or a big lie?

Is Big Australia a big mistake or a big lie?

Why do we have a housing crisis? We’re told it’s because there isn’t enough housing, so the price to purchase or rent is too high for young people. There’s no denying the truth of those two answers. One might, however, choose to dig a little deeper: Why do we not have enough houses in Australia, and why are prices so high?

When I google those questions, the answer generated is as follows:

“Limited land availability, slow modifications to planning laws, and global shortages of building materials have all contributed to the housing crisis in Australia. Geographical constraints have restricted the availability of land suitable for housing development, particularly in cities like Sydney.”

The University of Queensland (UQ), in an article entitled, Australia’s housing crisis.

How did we get here and where to now?, published in Contact Magazine, suggests;

“On one hand, we have disinvested in social housing and other forms of housing that are affordable. And on the other, there has been a lot done at the policy level to ensure housing is a commodity to be speculated on.”

Sounds reasonable doesn’t it? It’s certainly an answer politicians would like you to believe. Figures 1. and 2., indeed confirm prices in Australia for purchase and rent have risen at an extraordinary rate and faster than salaries and wages over the same periods.

Figure 1., House prices rises in inflation-adjusted terms

Figure 2. Australia – capital city asking residential rentsSource: Macrobond, SQM, Antipodean Macro

But are google’s and UQ’s answers the only answers?

For a shortage of anything to exist, demand must exceed supply. The answers provided by UQ and Google address the supply side of the problem (there is an estimated 200,000 to300,000 home shortage for our existing population), but, by definition, for a supply problem to exist, there has to be demand strong enough to exceed supply.

It’s economics 101.

Could that demand be a function of population growth? We know there has been a population explosion in Australia (Figure 3.).

Figure 3. Australia population growth 1824-2024

Source: McCrindle

Is the reason for the population explosion described in Figure 3., that we are all having too many babies? When introducing the baby bonus scheme in 2002 (remembered globally as singularly the worst policy created to encourage higher fertility rates), Treasurer Peter Costello famously encouraged Australians to “have one for mum, one for dad and one for the country”, and so we all jumped into the bedroom and started procreating. Or did we?

Sadly, that is not the case. Figure 4., reveals Australia’s birth rates have plunged well below the 2.1 children-per-woman ratio required to sustain a population. There was a bit of a jump after the baby bonus was introduced, but one-off payments don’t sustain a behaviour, and we quickly reverted to having fewer kids again.

Figure 4. Australia’s birth rateSource: IFM Investors, ABS, Worldbank

No, the exploding population is not from natural causes. It’s due almost entirely to migration – a social experiment that we will see is failing Australia and Australians on multiple levels. In 2023, between 518,000 and 528,000 new people called Australia home. In 2024, that number was lower but still an outrageous 446,000 people. Over those two years, migration increased Australia’s population by the equivalent of two Tasmania’s!

Figure 5. Australia – net annual overseas migration

Source: Macquarie Group

According to The Australian Financial Review’s Education Editor, Julie Hare, the number of student, graduate, bridging and skilled migrant visas rose by 200,000 to 1.41 million over the 12 months to the end of August 2024. That’s 5.4 per cent of our pre-migrant visa population. That will have an effect on housing and on almost everything else.

Australia’s net visa arrivals are landing in Australia at an unprecedented rate with international students being the primary (50 per cent) contributors. Of course, lots of imported students competing for rental properties must have an impact on rents.

The Federal Education Department estimates that international students occupy seven per cent of rental properties. And at the end of August, there were almost 680,000 international students in Australia.

As many know, a proportion of these students are pawns in an international game of money siphoning out of China that sees families buy homes for children attending Australian tertiary education. That drives up house prices.

Many other students don’t study at all, attend ‘bogus’ courses for non-genuine students, or are here to work, switching to other types of visas and subsequently seek protection visas.

In other words, the housing crisis is actually a migration crisis.

To begin easing the housing crisis, the Government must first firmly enforce temporary visa conditions, meaning sending temporary visa holders home after their visas have expired. No exceptions.

And if you believe rampant immigration is having a negative impact on our culture and social cohesion there’s another reason to slow immigration.

But isn’t Big Australia good policy?

According to the Centre for Independent Studies, 2010 report Populate and Perish by Jessica Brown and Dr Oliver Marc Hartwich,, Australia’s growing population will benefit the economy as consumers, savers, entrepreneurs, and workers. They note more people will make it possible to increase the division of labour. It will open up new opportunities for niche products and services, which otherwise could not be offered. And it will also make it possible to provide better mass transit infrastructure for which we currently lack the capacity.

While some of the above arguments are circular – do we really need more people to make more products or a transport system that is required only if we have more people – we are also told that our skills shortage and full employment demand more people.

The realities are somewhat different because we don’t have systems, structures and conditions to support more people.

As has been reported widely, The Atlas of Economic Complexity, produced by the Growth Lab at Harvard University, measures the complexity of economies around the world. The researchers analysed 133 countries and placed Australia at an embarrassing 93 – almost the bottom quartile, ranking our economy less economically complex than Uganda, which was ranked 92. Both sides of politics should be ashamed of the deterioration in our living standards they have been responsible for engendering and presiding over.  

Higher immigration won’t create the industries we need to increase our quality of life. They won’t build the industries that make our economy more complex.

Way back in the very early nineties my Melbourne University lecturer, Dr. Neville Norman, pointed to the idiocy and unsustainability of exporting raw wood chips to Japan, only to import the finished paper from Japan.

Today, three decades on, we export 20 tonnes of iron ore to import one iPhone 16 Pro Max. Worse, most of the revenue from the sale of that iron ore goes to just two families, the Rineharts and the Forrests. Sure, the Australian Government taxes their companies but all that does is incentivise them to minimise their profits, which reduces the tax take.

If the government had any sense, it would tax the revenue or insist on co-ownership of the mines that extract Australia’s resources.

Meanwhile, we ban coal mines and the installation of gas stoves in homes, but we sell the very same coal and the gas overseas at raw material prices, allowing the buyers to burn and use it without Australian gaining any economic benefit. Idiocy!

Talk about shooting ourselves in the foot! As one of the richest nations in the world in terms of energy and raw materials we should be one of the richest in the world financially. Instead, we are poor because we frustrate the economic advantages we have and instead impose restrictions on the use of those resources, systematically making us poorer.

Back in March 2013, I wrote a column for The Australian entitled, How to Become Poor: Sell raw materials, buy the end product. In that article, I called out the then Resources Minister Gary Gray. Without even a suggestion of a serious sovereign stake in our resource wealth, he suggested the answer to lower commodity prices was more volume. Idiocy.

That answer to a volatile raw material price is not more volume. It is adding value to it. The mining industry doesn’t employ a very high proportion of people so selling more won’t raise salaries enough to catch up to surging house prices.

A lack of sophistication in our economy and a lack of value-added exports however is guaranteed to keep wage growth low.

Of course, our tax incentives are all wrong to incentivise the start-up of an export value-adding industry. Meanwhile, the forced switch to unreliable sources of energy is making energy costs for businesses more expensive (both need to be fixed). Still, by adding sophistication to our exports and through sovereign co-ownership of our resource wealth, we would all earn more revenue, become wealthier and reclaim our once high standard of living.

That is, of course, the real crisis making us poorer, unable to afford more expensive housing that is driven up by stupid immigration policies. It’s all too hard for the calibre of our politicians, and in any case, the election cycle is only three years, so why would they bother (we also need to fix the election cycle)? Instead, we are told a distracting ‘porky pie’ that the real crisis is housing, and the reason for that is we don’t have enough workers to build more apartments.

As an aside apartments aren’t great either.

Figure 6. More apartments equal fewer babies

Source: X, @MoreBirths

According to our leaders, by importing more workers we will be able to build more apartments to house all the workers. The circularity is stunning. But the issue is that we are importing students, not skilled workers. If there really was a skills shortage shouldn’t the government be handing out visas to skilled workers?

If it now sounds just a little bit stupid, it is.

We are getting poorer, and immigration is making it worse, not better. The answer is not to knock down more houses and knock up more apartments. The answer is to slow or even stop migration for a period long enough to allow infrastructure to catch up and to fix the fundamental deficiencies the last thirty or forty years of government policies and ineptitude have created.

You can read the 2013 article here.

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Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.