Australia is in the midst of a population boom, driven by a surge in net migration following pandemic border closures.
The rebound highlights the growing need for not only more homes to house the expanding population, but also better infrastructure to improve the liveability of our cities.
Prior to the pandemic in the decade to March 2020, the annual population increase through net migration averaged close to 220,000 persons. But in the two years of pandemic-related disruption, the population increase through net migration was less than 2000 persons across both 2020 and 2021 combined.
In the 2022 calendar year, population growth roared back driven by record net migration in excess of 400,000 persons.
Resurgent population growth has accelerated in 2023 according to the ABS, with the March quarter recording the highest national quarterly population increase on record.
Though the population is growing at a fast pace, the story differs slightly between the states and territories.
Western Australia has recorded the fastest population growth of the states and territories in the 12 months to March 2023, with growth of 2.8%.
Victoria has reversed the Covid-induced falls, recording the largest numeric increase of 161,700 people.
Queensland continues to record strong growth, though the higher growth of the previous year relative to other states was due to the elevated pace of interstate migration, which has begun to ease slightly.
New South Wales is attracting the largest number of people from overseas but continues to lose the most migrants interstate.
While the official data is not particularly timely, there are many indications the already strong population growth has continued and even accelerated.
Net long-term and permanent arrivals are a timelier proxy for the official data and indicate continued strong net migration gains in the June quarter. Based on this, overall annual growth could clock another record of just north of 600,000 persons, with the pace of growth accelerating again to 2.3%.
Resurgent population growth has been a key factor in bolstering economic activity. Without the strong growth, the slowdown in economic activity would have been sharper. Skilled migrants have also played an important role in filling workforce shortages.
While growth is expected to ease in 2024 and 2025, faster than expected population growth has meant more people are calling Australia home, giving rise to a mismatch between housing supply and demand.
Given the current housing crisis, the provision of affordable homes remains a critical challenge.
Construction activity has been hampered by higher financing and materials costs and labour shortages, and the value of completed projects has failed to match the value of work in the pipeline.
After reaching a decade low, approvals have begun to turn around as materials shortages and cost pressures ease, the interest rate tightening cycle comes to an end and home prices recover.
Though building activity shows signs of recovery, an undersupply of new homes and emergent housing shortfall is generating immediate supply issues.
The supply side of the housing market needs to be better able to adjust when needed.
The pickup in population growth also necessitates essential urban infrastructure beyond housing, as well as improved connectivity between cities.
The solutions to the current housing crisis are multi-pronged. Challenges for developers and planning rules are key impediments for growing supply, while infrastructure and investment frameworks are crucial for liveability of our future cities.
Making use of underutilised space in existing homes is another way to address housing supply, while reducing the need for new construction and the associated environmental impacts. There is significant well-located spare housing that policy changes could unlock.
As the population surges, a combination of fast-tracking new supply of more of the right type of homes built where people want to live, and policies that encourage better use of existing homes can help ease supply constraints.
