Australia’s population has grown steadily in recent years, primarily driven by overseas migration. According to data from the Australian Bureau of Statistics (ABS), in 2024 alone, the population increased by 1.7% to 27.4 million, with the largest portion of people (340,800) added by migrants. By 2030, Australia's total population is forecast to be around 29 to 30 million people.  

Growing populations play a significant role in boosting labour productivity and economic growth, but they also come with considerable challenges, namely increasing housing prices in capital cities. Housing affordability has been an ongoing challenge for many Australians renting, seeking to purchase a home, or managing mortgage repayments in recent years. A recent report, Five Economic Themes That Will Dominate the Next Parliament, jointly published by the e61 Institute and UNSW Business School, found that governments must implement critical policy priorities to ensure that a growing population contributes positively rather than becoming a burden.  

The policy challenges and opportunities discussed in the report set the stage for a recent discussion moderated by the report’s co-author, UNSW Scientia Professor Richard Holden, a leading economist, alongside Michael Brennan, CEO of the e61 Institute and former Chair of the Productivity Commission, and urban planning expert and former Sydney Lord Mayor, Lucinda Turnbull AO.  

A snapshot of Australia’s population growth model 

The continued growth and demographic expansion of people across Australia ensures the Reserve Bank of Australia (RBA) and future Australian governments can sustainably manage interest rates while supporting the longer-term health of Australia's real estate and the broader construction sector. 

Yet growing populations in Australia’s capital cities, particularly New South Wales (NSW), Melbourne, and Queensland, have significantly impacted the Australian housing market, driving housing demand upward and intensifying pressure on residential construction and home building industries.  

Policymakers and local governments in NSW and Canberra have responded to this by adjusting zoning laws and initiating targeted housing policy measures to boost the supply of housing, including the construction of new homes, townhouses, and new apartments. Despite these efforts, housing construction productivity has struggled due to labour market shortages and supply chain disruptions, resulting in low levels of available housing and persistently low vacancy rates. 

State governments and agencies have increased investments in social housing programs, taking cues from urban development practices in regions such as Perth, Adelaide, Tasmania, and South Australia. Despite all this, there is still a housing shortage, with the number of dwellings supplied not meeting demand. 

Learn more: Why the housing crisis is becoming a business problem

e61’s Michael Brennan explained that Australia is a bit of an outlier in terms of its distinctive demographic trajectory in recent decades. He explained that compared to countries like Canada and New Zealand, this rapid population growth has significantly intensified pressures on housing costs and house prices, particularly impacting young people and low-income households in Greater Sydney and Brisbane. “Over the last 20 years, the population has grown by something in the order of 35 per cent,” he said. 

To really address the challenge of housing supply, Ms Turnbull said Australia must adopt a more holistic approach to city planning, rather than relying solely on rezoning as a solution to housing affordability.

She explained: “Cities aren't just whether there's a two-storey building or a three-storey building or a 10-storey building or a 50-storey building. It's all about how the place works, how the services work – health and education being two conspicuous ones, roads, transport, grey infrastructure, green infrastructure, social infrastructure. The whole shooting match needs to be well-planned and well-organised.” 

Migration, productivity growth, and demographic pressures 

Population growth has broadly benefited Australia’s economy, especially in fiscal terms, explained Mr Brennan. “Aggregate GDP has been healthy, underpinned by pretty strong population growth,” he said. “The present value of a migrant, on the whole, is very positive for Australia in fiscal terms, in economic terms; they come here, they pay a lot of tax, at least in the early years, don't draw on the services of government a lot, and they tend to be younger than the Australian average. 

“So, having a large migrant intake, high population growth, has kept the population younger than we would otherwise have been," he added. 

However, managing land use to accommodate this growth within existing city boundaries presents complexities. Mr Brennan explained: "Given that we've absorbed this high population growth largely within the footprint of the existing five cities – it's not like we've created new cities, and it's not like we've seen a Phoenix or an Austin... We've largely done it on the existing footprint.  

“That's naturally pretty tough, and it's meant – because we have this very detached and pretty sparsely spread-out population – it had to mean a degree of densification, which is politically challenging. As I said earlier on, I think we've done very well, but I think it's easy enough to see why it's been a difficult process to get right.” 

This situation, he continued, has adversely affected homebuyers and homeowners in Australia’s capital cities, limiting new dwellings and making homeownership increasingly difficult for households with lower incomes, exacerbating homelessness and affecting overall wellbeing.  

“Australia is distinctive because it's highly urbanised yet has the highest proportion living in detached houses – creating a paradox where we've absorbed significant population growth within the existing footprints of our major cities.” 

Australia’s housing construction productivity crisis 

Another key issue that came up during the conversation was Australia’s sluggish construction times. Benchmarking Australia’s slow construction timelines against international standards, Prof. Holden said: "During the pandemic, China built two hospitals the size of Westmead – well, one the size of Westmead and one double the size of Westmead – in four weeks. And to take maybe a less extreme example, from soup to nuts to build a house in Japan takes about four months. And in Australia, I think we're talking about something closer to a year and a half." 

Emphasising the need for smarter, more efficient regulation to streamline construction processes and enhance sustainability, Mr Brennan critiqued current urban planning and land use practices, arguing, “In planning, we've allowed a regulatory culture – a regulatory ecosystem – to emerge that is regulating for things way above the minimum... It's led to a level of intervention that we don't see in all forms of regulation." 

Ms Turnbull shared similar concerns and noted that excessive caution is creating a lag in housing supply timelines, significantly slowing down new housing stock creation, and creating unnecessary bottlenecks in construction. To address this, she advocated for structural reforms promoting affordable housing, calling for greater policy clarity, improved housing development processes, and sustainability benchmarks. “What I would love to see is a tax system which works for its creation, just like the tax system works so well for mum and dad property investors... not as part of a government… sort of handout, but as a structural reform to the tax system.” 

One key policy area she urged consideration of is build-to-rent housing. Highlighting the importance of housing providers in addressing this gap, "The class of housing which is completely lacking, pretty much completely lacking, is built-to-rent investment housing," said Ms Turnbull, who noted that the business model of wealthy families in other cities such as New York and London focuses on high-density, build-to-rent housing: "We don't have any institutional build-to-rent housing, and that's what's really tough on younger people."

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Why governments must “de-terrify” higher-density living 

Australia’s ability to deliver adequate new housing supply remains tightly connected to the resilience and capacity of its construction industry. The sector currently faces considerable pressures, particularly in dwelling construction within both greenfield and urban infill settings, limiting options for renters and placing significant strain on household incomes. Unlike comparable countries such as the United Kingdom, Australia's challenge partly stems from a persistent shortage of skilled workers and limited institutional investment in rental housing. 

Australia's productivity depends not just on migration, but also on smarter policy reforms, better infrastructure, efficient commuting solutions, and streamlined urban planning. Yet both experts stressed migration’s critical role in tackling skills shortages – especially in healthcare and aged care. 

Ms Turnbull highlighted the critical role that skilled migrants play, explaining: “Anyone who's had contact with childcare or aged care facilities knows the labour force predominantly comes from migrant backgrounds… you need people to look after you in hospitals, daycare, aged care.” 

Learn more: Alan Kohler: market distortions are fuelling Australia’s housing crisis

Importantly, they both dismissed fears about demographic imbalance caused by sustained migration, asserting that the overall benefits outweigh the challenges. Ms Turnbull also explained that density offers many overlooked benefits. She said: "Density actually gives you a much better lifestyle, so that you don't have to get in your car to go and get a litre of milk. You need to de-terrify people, de-escalate the fear." 

While Mr Brennan said: "Has population growth been a good thing for Australia? I think it has," he reflected. "Ultimately, this is an area of comparative advantage for Australia. This is something we've done well. It's been beneficial for us. Why shouldn't we continue to access the benefits of being an attractive place for people overseas?" 

Addressing some of these issues through targeted policy reforms and strategic infrastructure investment will be essential to easing the housing affordability crisis, supporting renters, and ensuring sustainable growth in the years ahead.