An unprecedented influx of migrants into Australia is putting upward pressure on inflation that could lead to another rate hike next week.
A near-record 413,530 migrants moved to Australia in the year to August – a figure well above the 315,000 the Treasury forecast in the May 2023-24 budget.
Abdul Rizvi, a former immigration department deputy secretary, now predicts a record 500,000 migrants moved to Australia in the year to September.
HSBC chief economist Paul Bloxham, who previously worked at the Reserve Bank, said new arrivals to Australia added to inflationary pressures and rents rose by double digits last year.
“With many more people involved in the economy, there are many more consumers,” he told The Australian Financial Review.
After 12 rate hikes since May 2022, Reserve Bank interest rates are now at an 11-year high of 4.1 percent.
Mr Bloxham said a rate hike on Melbourne Cup Day next week was now likely, which would mark the 13th increase in 18 months, with inflation still high at 5.4 per cent.
Sydney Radio 2GB host Ben Fordham said the influx of migrants filling jobs and spending money was a “pretense” that average Australians had more money in their pockets to spend, when in fact they were struggling with living costs and would have to contend with mortgage pressure.
“We are being paralyzed by the high level of migration.” The record number of arrivals from abroad is increasing the pressure on the economy.
“Half a million people have packed their bags and are now at home in Australia.”
“This is a rate we have never seen before in the history of this country.”
“Allowing half a million people to move to Australia creates a smokescreen.” Migrants move to Australia and spend money.
“It creates the illusion that our finances are in better shape, which is prompting the Reserve Bank to raise interest rates,” he said.
Economists say Australia’s record immigration over the past 12 months is driving up inflation and contributing to the competitive rental market (Pictured: File image from a Sydney auction)
Fordham said the Albanian government needs to focus its attention on the real estate market and how the country’s population growth of 2.2 percent – one of the highest in the world – is affecting it.
“The impact on housing is huge, our rental vacancies are at 1.1 per cent across Australia and rental costs are through the roof.”
“Young people are being priced out of the market and if you can afford a home, we are spending record amounts on loan repayments.”
“The gap between wages and real estate costs has never been greater.” It has tripled since the 1980s. And the more people we welcome, the more pressure is applied.
He stressed that when demand for housing exceeds supply, it is inevitable that housing prices will rise and hundreds of thousands of migrants will look for a place to stay.
“Treasurer Jim Chalmers has to face some facts. We cannot free ourselves from the crisis in the short term – but we can slow down the number of arrivals from overseas. “Come on, Jim, show some backbone,” Mr. Fordham said.
Economists from Australia’s four major banks are all predicting a rate hike on November 7th.
One Nation leader Pauline Hanson has also taken aim at the government.
“The Albanian Labor government’s handling of immigration has been disgraceful,” Senator Hanson wrote to X, formerly of Twitter.
“They could easily fix it, but they choose not to. Australians are hurting and it’s their fault.”
There has been a surge in property auctions on the east coast as sellers look to sell properties ahead of the expected rate hike on Melbourne Cup Day.
Some 2,883 properties were put up for auction on Saturday and another 639 are expected to go under the hammer in the next few days, making it the busiest period since April 2022, CoreLogic data showed.
This is an increase of 80 percent compared to the same period last year, but is still below the record auction volume at the end of 2021.
A near-record 413,530 migrants moved to Australia in the year to August – a figure well above the 315,000 the Treasury had forecast in the May 2023-24 budget. Abdul Rizvi, a former immigration department deputy secretary, now predicts a record 500,000 migrants moved to Australia in the year to September
Melbourne is home to the most properties with 1,746 properties listed, followed by Sydney with 1,179, Brisbane with 241 and Canberra with 165.
Auctions in Adelaide are up slightly with 174 planned, while in Perth there are fewer than last week and only three properties are scheduled to go to auction in Tasmania.
It comes as mortgage owners face what could be the first rate hike since June.
Inflation data released this week showed consumer prices tracked by the Australian Bureau of Statistics rose 1.2 percent in the three months to September and annual inflation rose 5.4 percent.
On Thursday, Reserve Bank Governor Michele Bullock announced that consumer price index results were slightly higher than forecast and service prices remained higher than she would have liked.
The Reserve Bank’s next meeting is on November 7, Melbourne Cup Day, and Ms Bullock has made it clear that the board will not hesitate to take action on interest rates if it deems necessary.
RBA governor Michelle Bullock has said she will not hesitate to raise interest rates
Hayden Groves, president of the Real Estate Institute of Australia, said some vendors had delayed auctions until this weekend to beat next Tuesday’s expected rate hike after months of waiting.
“Sellers will be looking to address that because we see needs shifting as interest rates rise again,” Mr Groves told AAP.
“People are thinking this might be the beginning of the end of a booming market.”
He said it is still a seller’s market in most jurisdictions, with single-family homes in the highest demand.
“People will certainly now be thinking about selling and taking profits, maybe even downsizing,” he added.
Clearance rates have been around 65 per cent since July, but Mr Groves said he would not be surprised if that rose to 70 per cent over the weekend.
Earlier this week, Ms Bullock said most Australian households and businesses had weathered the deteriorating economic situation and higher interest rates fairly well, but the pressure had not been felt evenly.
The RBA estimates that around five per cent of all variable rate borrowers pay more for essentials and housing than they earn.
This rose to a quarter of highly indebted borrowers whose loans were at least four times their income.
Central Bank research also showed the group’s overall cash flow soared while tenants were under pressure.