The real driver of Australian population growth

Australia’s population grew by 2.5 percent to 26.8 million people over the 12 months ending 30 September, according to new figures from the Australian Bureau of Statistics (ABS). This was an annual increase of 659,800 people, with migrants making up 83 percent of the increase at 548,800. Natural increase, which is births minus deaths, contributed to a net gain of 111,000 people.

Natural increase was 3.9 percent lower than the same period in 2022, reflecting a trend in Australian women having fewer babies. Migration was 60.3 percent higher than the same period in 2022, however the data from this period was impacted by the border closure until February 2022. Most migrants arriving in the 12 months to 30 September 2023 were international students and workers on temporary visas. The overwhelming majority of migrants are coming from India, China, and the Philippines. Of the 548,800 net migrants that relocated here over the 12 months, 34 percent settled in New South Wales, 29.5 percent settled in Victoria and 16 percent settled in Queensland.

Western Australia had the fastest population growth rate, up 3.3 percent, followed by Victoria at 2.9 percent, Queensland 2.7 percent, New South Wales 2.3 percent, Australian Capital Territory 2.1 percent and South Australia 1.7 percent. The lowest growth was in Tasmania at 0.3 percent.

Drivers of Western Australia’s highest population growth rate since 2009 include record employment and a booming economy. The state government upgraded its state final demand forecasts for FY24 from 3 percent to 4.5 percent in December.

While the biggest contributor to the state’s population growth is international migration, Professor Amanda Davies, Head of Social Sciences at the University of Western Australia, comments that strong interstate migration is resulting from “‘push’ factors operating in major east coast states, and in particular high costs of living and housing.” Strong buyer demand has pushed the Perth median house price up 18.6 percent, which is the strongest annual rate of growth anywhere in Australia.

The Perth median house price is $718,560, according to CoreLogic. Real Estate Institute of Western Australia CEO Cath Hart commented: “We can expect to see house prices and rents continue to rise, homes to sell and lease quickly, and the rental vacancy rate to remain low for some time yet.”

The ABS also tracks interstate migration, which is the movement of Australian residents between states and territories. Over the 12 months to 30 September, Queensland had the highest rate of net interstate migration at 32,625 people, followed by Western Australia with 11,233.

The state that lost the most residents was New South Wales, with a net 33,302 people moving elsewhere and the bulk of them departing Sydney. This net outflow is much higher than other parts of Australia. The second highest loss through interstate migration was in the Northern Territory with 3,606. Victoria lost just 1,119 people. NSW Productivity Commissioner Peter Achterstraat AM recently warned that Sydney is losing many residents aged in their 30s and 40s due to unaffordable property values. He says Sydney “could become known as the city with no grandchildren”.

There has been a substantial increase in the number of Australians earning high incomes who are renting their homes instead of owning them, and this may be another element contributing to higher market demand and continually rising rents, according to new research.

The portion of households with an annual income of $140,000 per year (in 2021 dollars), went from 8 percent of the private rental market in 1996 to 24 percent in 2021, according to research by the Australian Housing and Urban Research Institute (AHURI). The AHURI study highlights that longer-term declines in the rate of home ownership in Australia are likely the cause of this trend.

The biggest challenge this creates is the flow-on effect on lower-income households because they may face stronger competition for a limited supply of rental stock, and they also have less capacity to cope with rising rents that look likely to keep going up due to the entrenched undersupply.

The 2024 ANZ CoreLogic Housing Affordability Report notes that weekly rents have been rising strongly since the pandemic and are currently re-accelerating. “Nationally, annual rent growth has lifted from a recent low of 8.1 percent year-on-year in October 2023, to 8.6 percent year-on-year in March 2024,” according to the report. “The re-acceleration was particularly evident in house rents, where annual growth bottomed out at 6.8 percent in the year to September, and rose to 8.4 percent in the year to March 2024.”

Rents are also rising in markets that have experienced recent declines. “In Hobart, rent values saw a downturn of -6 percent between March and October 2023. Since bottoming out in October, rents have now moved 5 percent higher to the end of March, and are just 1 percent off the record highs in March 2023. The Canberra rental market was the only other capital city to see a decline in rents in recent years, where rent values fell -3.8 percent between June 2022 and September 2023. Since then, Canberra rents have risen 3.5 percent, and are 1 percent from the record high.”

The Productivity Commission’s review of the National Housing and Homelessness Agreement points out that high-income earners also have more capacity to relocate to cheaper markets when rents rise, which creates more competition for lower-income households competing for homes in those same areas.

ANZ CoreLogic notes that rents in lower-cost markets have risen the most in recent years, so much so that the portion of earnings that lower-income households have to dedicate to rent has reached a record high 54.3 percent. For middle-income households, it’s 32.2 percent and for high-income households, it’s just 22.9 percent. ‘Housing stress’ has long been defined as requiring more than 30 percent of income to put a roof over your head.

While some high-income households may aspire to own their own homes, rising property values have made that a difficult and long process given the years it takes to save a deposit. ANZ CoreLogic data shows it now takes a median 10.1 years in the capital cities and 9.9 years in regional areas to save a 20 percent deposit to buy a property.

It also takes 48.3 percent of income in the cities and 47.1 percent in the regions to cover mortgage repayments at today’s home loan interest rates, which is far greater than the portion of income required to service rents at a median 30.4 percent in cities and 33.3 percent in the regions.

The real driver of Australian population growth

With the number of local births on the decline, Australia is increasingly looking to other sources to meet ongoing labour demands

This may be contributing to continually rising weekly rents