According to the Albanese government’s second budget released on Tuesday, more than 700,000 people are expected to migrate to Australia by the end of 2022, which will further exacerbate the country’s already tight rental market. This increase in migration is viewed as a one-time catch-up following the COVID-19 pandemic.
The budget documents also confirm a significant surge in rental demand, partly due to the arrival of new tenants after Australia reopened its international borders. Treasury officials have observed that Australia’s rental market is currently very tight, with national vacancy rates standing at approximately 1%, almost reaching record lows, and advertised rents growing at a rate exceeding 10% since last month.
The budget contains some relief measures for renters, but only for the 1.1 million households who receive the maximum Commonwealth Rent Assistance payment. These households are expected to benefit from an increase in the payment rate to 15%.
The Australian government is anticipating that the average rental costs will rise in the coming years, as the increases in advertised rents start reflecting on existing lease agreements during renewals. The Labor Party is moving forward with its plan to increase the cap on skilled migrant visas each year, which aims to resolve the severe workforce shortages experienced by numerous industries.
However, this decision has sparked discussions on how new migrants will be able to secure accommodation in Australia, given the country’s housing affordability crisis and tight rental market.
In a recent speech at the National Press Club in Canberra, Reserve Bank Governor Philip Lowe stated that Australians prefer to live close to infrastructure and have a fascination with large plots of land. During the pandemic, the average household size has decreased as share houses split up, and if rents are to decrease, household sizes will need to increase again, according to Lowe.
Opposition Leader Peter Dutton acknowledged the demand for more skilled workers but expressed concerns over how Australia’s housing market will cope with the influx of new migrants.
The budget released on Tuesday predicts that approximately 400,000 people will have migrated to Australia by the end of this fiscal year, with an additional 315,000 people expected to arrive by the end of 2024. The budget documents indicate that the higher estimate for net overseas migration is primarily due to fewer temporary migrants leaving Australia than usual, rather than an increase in the number of people arriving.
Despite the short-term positive outlook, it is expected that total net overseas migration will not reach the levels forecast prior to the pandemic until the end of 2030. According to the budget papers, migration is projected to return to normal patterns from the 2024-2025 fiscal year, with net overseas migration forecast to remain at 260,000 for the 2025–2026 and 2026–2027 fiscal years.
The budget documents highlight that net overseas migration was almost 500,000 lower than expected before the pandemic by the time border restrictions were lifted at the end of 2021. The Treasury expects that stronger migration will support employment growth, with an anticipated 1 per cent increase in the next fiscal year, which is a quarter of a percentage point stronger than the October budget forecast.
The Albanese government has unveiled its second budget, with a focus on overhauling the federal migration system to address skill shortages. While the final migration strategy will be released later this year, the government plans to allocate 70% of places in the 2023-2024 permanent migration program to the skill stream. The government also aims to improve pathways to permanency for temporary skilled migrants.
The Australian government has announced plans to extend post-study work rights for Temporary Graduate Visa holders in select degree programs by an additional two years in order to address the shortage of skilled workers in certain sectors.
The government is allocating $50 million over four years from the 2023-2024 financial year to combat the exploitation of temporary migrant workers. The Centre for Population will receive $22 million over four years and $5.6 million per year thereafter to model the fiscal benefits of migration. The government will also provide $125.8 million over the next four years to build on last year’s Jobs and Skills Summit migration reforms.
The Australian government has allocated $75.8m to extend the visa processing resources to clear the backlog of visa applications. Furthermore, $50m over four years from 2023-2024, and $15.3m per year after that, will be spent on compliance activities to ensure the integrity of the migration system. However, visa applicants will be required to pay higher fees, with application charges expected to increase by $100m in 2023–2024 and by $665m over the five years from this financial year to the end of 2027.