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The great migration and interest rate debate

As everybody knows by now, Australia’s housing market is facing a dwelling undersupply that is set to become critical in the near future. Many are pointing the finger at our rapidly growing population and suggesting that affordability issues are going to become insurmountable for first home buyers soon if we don’t slow down the influx of new residents into the country.

Concerns about migration are not just centered on property prices though, with a lot of talk about increasing pressure on some of our already over-populated inner cities and infrastructure that just can’t cope, such as roads, public transport and hospitals.

But according to an article published on domain, the political push to put the brakes on population growth has increased the likelihood of interest rate rises over the long term by igniting critical skills shortages. 

The article examines findings published in Access Economics’ Business Outlook for the September quarter, which predicts that growth in the nation’s working-age population is set to decline significantly over the next two years, to just 1% in 2012. This is less than half the 2.2% rate from 2008-09.

The report suggests that with pressure placed on both major political parties to curb population growth in marginal seats, annual net migration is likely to fall to around 170,000 within a few years, down from 231,000 in the last financial year.

According to the report, “Changed rules for foreign students plus a populist election … mean migrant numbers are falling fast. Not even a lift in the participation rate will stop the next few years being marked by rising skills shortages.”

It is anticipated that job markets will find it tough going due to the combined forces of lower migration and the commodity boom, which will in turn place upward pressure on inflation. And we all know what that means…an increased likelihood of further interest rate rises next year.



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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