Households are going backwards in 13 developed economies, including Australia, as record immigration runs into a housing crisis.
Already a subscriber?Across much of the developed world, one of the most dependable drivers of economic growth is faltering.the demographic drag from ageing populations and falling birth rates. That’s now breaking down as a surge of arrivals since borders reopened after the pandemic runs headlong into a chronic shortage of homes to accommodate them.
Put another way: Over the past two years, 2.4 million people arrived in Canada, more than New Mexico’s population, yet Canada barely added enough housing for the residents of Albuquerque. Biswas arrived in Canada in the middle of 2022, just as per-capita GDP started plunging amid the start of the post-pandemic immigration boom and the Bank of Canada’s aggressive interest-rate tightening cycle.
The chronic under building of homes and decades of continuous rises in prices has drained funds from other parts of the economy toward housing. That lack of investment in capital — combined with firms’ focusing instead on expanding workforces due to cheaper labour costs — has driven down productivity, which the Bank of Canada says is at “emergency” levels.
GDP has expanded every quarter since a short COVID-induced recession in 2020, yet on a per-capita basis, GDP contracted for a third consecutive quarter in the final three months of 2023 — the deepest decline since the early 1990s economic slump. “But in the very near term, you can see that it’s putting upward pressure on rents, house prices and clearly that’s a concern for many and the demand for some services is seeing sticky inflation.”The government there last month made immediate changes to an employment visa program, introducing an English-language requirement and reducing the maximum continuous stay for a range of lower-skilled roles, citing “unsustainable” net migration.
“A very good bit of the growth that we saw through the 2010s was down to net migration,” said Paul Johnson, director of the Institute for Fiscal Studies. “In terms of the overall size of the economy, it’s been really important. What’s really hard to say is what impact the net immigration has had on the per-capita numbers.”
The UK’s post-Brexit immigration system aimed to stop cheap labour from Europe and prioritise high-skilled workers. However, the government allows some foreign workers easier access if they are in shortage-hit sectors.“Those shortages really are pretty much always caused by poor paying conditions, although the employers will tell you it’s all skills,” said Alan Manning, labour market economist at the London School of Economics.
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