An unprecedented influx of migrants into Australia is putting upward pressure on inflation that could lead to yet another interest rate hike.
In the year to August, a near-record 413,530 migrants moved to Australia – a level well above the 315,000 level Treasury predicted for 2023-24 in the May Budget.
Abdul Rizvi, a former deputy secretary of the Department of Immigration, is now forecasting a record 500,000 migrants moved Australia in the year to September.
HSBC chief economist Paul Bloxham, who previously worked at the Reserve Bank, said new arrivals in Australia were adding to inflationary pressures, with rents surging by double-digit figures during the past year.
‘With many more people in the economy, there are also many more consumers,’ he told The Australian Financial Review.
Reserve Bank interest rates are now at a an 11-year high of 4.1 per cent following 12 interest rate hikes since May 2022.
Mr Bloxham said a Melbourne Cup Day rate hike 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 ‘smokescreen’ that average Australians had more money in their pockets to spend while they are actually battling with cost-of-living and mortgage pressures.
‘We are being crippled by high migration. The record number of high overseas arrivals is heaping pressure on the economy.
‘Half a million people have packed up their lives and now call Australia home.
‘It’s 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 an illusion our finances are in better shape, which prompts the Reserve Bank to move on interest rates,’ he said.
Economists say Australia record immigration in the last 12 months is pushing up inflation and contributing to the competitive rental market (pictured: file image of a Sydney auction)
Fordham said the Albanese government must turn it’s attention to the housing market and how the country’s 2.2 per cent population growth – one of the highest in the world – is affecting it.
‘The impact on housing is enormous, our rental vacancies are at 1.1 per cent across Australia and the cost of renting is through the roof.’
‘Young people are being priced out of the market and if you can afford a home, then we’re spending record amounts on loan repayments.
‘The gap between wages and property costs has never been wider. It has tripled since the 1980s. And as we welcome more people, more pressure is applied.
He highlighted that when demand for housing outstrips supply, it it is inevitable that the price of housing will rise with hundreds of thousands of migrants looking for a place to live.
‘The treasurer Jim Chalmers needs to face a few facts. In the short term we can’t build our way out of trouble – but we can slow the overseas arrivals. Come on Jim, show some backbone,’ Mr Fordham said.
Economists from the Big Four Australian banks are all forecasting a November 7 interest rate rise.
One Nation leader Pauline Hanson has also taken aim at the government.
‘The Albanese Labor Government’s handling of immigration has been shameful.’ Senator Hanson wrote to X, formerly Twitter.
Read Related Also: Palestine Israel conflict LIVE: Latest video from Gaza war as IDF strikes 320 targets in 24 hours and medics describe ‘horror movie’ scenes in hospital
‘They could easily fix it but they choose not to. Aussies are hurting and it’s their fault.’
There has been a jump in real estate auctions along the east coast as sellers try to offload properties ahead of the anticipated interest rate hike on Melbourne Cup Day.
Some 2,883 properties were listed for auction on Saturday and an additional 639 are set to go under the hammer in the next few days, which would make it the busiest period since April 2022, CoreLogic data showed.
That’s 80 per cent spike on this period last year but still below record auction volumes in late 2021.
A flood of houses hit the market in recent days ahead of an expected interest rate rise that will further increase mortgage bills
Melbourne is hosting the most with 1746 properties listed, followed by Sydney with 1179, Brisbane 241 and Canberra 165.
Auctions in Adelaide are up marginally with 174 scheduled, while Perth has fewer than last week and just three properties are set to be auctioned in Tasmania.
It comes as mortgage owners face what could be the first interest rate hike since June.
Inflation data released this week showed consumer prices tracked by the Australian Bureau of Statistics rose 1.2 per cent over the three months to September and annual inflation grew 5.4 per cent.
On Thursday, Reserve Bank Governor Michele Bullock revealed the consumer price index results came in a little higher than forecast and service prices remained higher than she was comfortable with.
The Reserve Bank next meets on November 7, Melbourne Cup Day, and Ms Bullock has made it clear the board will not hesitate to act on interest rates if it deems it necessary.
RBA governor Michelle Bullock has said she will not hesitate to increase interest rates
Real Estate Institute of Australia President Hayden Groves said some vendors had dragged auctions forward to this weekend to beat the expected rate rise next Tuesday after months on hold.
‘Sellers will be trying to beat that because we do see needs shift once we do start to see rates rise again,’ Mr Groves told AAP.
‘People think that perhaps that might be the beginning of the end of a buoyant market.’
He said it was still a seller’s market in most jurisdictions with family homes in highest demand.
‘People will be certainly thinking of selling now and taking profits, perhaps downsizing,’ he added.
Clearance rates have hovered around 65 per cent since July but Mr Groves said he would not be surprised if that jumped to 70 per cent over the weekend.
Earlier in the week, Ms Bullock said most Australian households and businesses had been coping pretty well through worsening economic conditions and higher interest rates, however pressures had not been felt evenly.
The RBA estimates roughly five per cent of all variable-rate borrowers are paying more for essentials and housing than they are bringing in.
This increased to one quarter of highly leveraged borrowers with loans at least four times their income.
Central bank research also showed while tenants have been under pressure, spare cash flow that group’s overall cash flow jumped as higher cost of living and rising rest had been offset by higher incomes linked to the tighter labour market.
