Australia: The most immigrant friendly nation on earth?

Australia had the highest rate of immigration-per-capita in the OECD in 2009. This figure measures inflows of foreign migrants, as a proportion of its own population. This indicates that immigration plays a bigger role in Australian society than any other rich nation. Its only rival is European minnow Luxembourg, a nation more than 44 times smaller than Australia.

Inflows of immigration per capita across the OECD, 2009

The 697,000 immigrants that Australia received in 2009 equated to 3.15% of Australia's 22 million population. For comparison the OECD nation with a population closest to Australia's, the Netherlands, at 16.5 million, received only 104,000 immigrants.

Fellow English-speaking and resource-rich country Canada was also at the upper end of the scale but still well below Australia at 1.88%. The United States, a nation built on long-term inward migration, had a rather low 0.83%.

Inflows of immigration per capita across selected OECD nations, 2000-2009

Australia only overtook Luxembourg in 2009 however has sustained a clear upward trend through the years 2000 to 2009. GFC-suffering Ireland (and Spain) had a heavy downturn in inward migration during the late 2000s, while the United States and United Kingdom sustained their levels fairly consistently throughout the period.

The Australian migration context

Australia is a rich, stable, well-run nation with good infrastructure and strong education and healthcare systems. Its English-speaking characteristic and Asia-friendly distances and timezones make it an attractive destination for migrants around the world. In terms of economic performance, Australian was one of the few rich nations to avoid a recession throughout the GFC. It has maintained relatively strong GDP growth, recently underpinned by a mining boom, low unemployment and low levels of government debt.

The Australian federal government implements various policies to promote immigration. It has a slick immigration system designed to facilitate immigration to satisfy the labour needs of the country. It uses a points system and variety of visas types to ensure the right immigrants are approved. In 2010-11, 32% of Australia's long-term migrants were part of the skilled program, and around 26% were professionals or managers. Further streamlining of the points-based assessment system rolled out on 1st July 2012.

Australia has flexible labour laws that supports casual workers, and working holiday visas designed meet seasonal agricultural labour demands in remote areas.

The Australian Taxation Office supports some migrant-friendly taxation options such as Living Away from Home Allowance (LAFHA). It should be noted, however, that LAFHA is currently being phased out, which may reduce the attractiveness of Australia to some high-skilled workers.

The largest proportion of migrants are Chinese or Indian. Many settle in the CBDs of Australia's largest cities. 79% of the residents of Sydney's CBD, for example, were born outside of Australia. Greater Sydney's and Perth's figure is 41% and Melbourne's is 37%. For Australia as a whole, 30% of its residents are foreign-born.

The economic benefits of migration

The most obvious effect of net-positive migration is an expansion of the economy. More workers means more work which means higher GDP. This increase leads to an increase in tax revenues for the government and an expansion in internal market competitiveness. In terms of per-capita GDP increases, the results of studies vary, but most indicate at least a minimal boost, and none suggest a reduction.

Attracting high-skilled knowledge economy workers also has long-term benefits for the country. These workers go beyond merely satisfying short-term labour shortages and tend to produce a disproportionately high level of productivity, and thus GDP boost. Australia's brain gain is the loss of India, China, the United Kingdom et al.

Sources

World Economic Outlook Database April 2012
Inflows of foreign population into selected OECD countries

Only 21% of Sydney CBD residents were born in Australia

Only 21% of Sydney CBD residents were born in Australia. Across the whole nation, 70% of people were born in Australia, and this huge difference illustrates Sydney's cosmopolitan make-up.

Percentage of CBD residents born in Australia (Source: ABS Australian Census 2011)

Melbourne city centre follows closely behind Sydney CBD at 26% and Perth's and Brisbane's CBDs are 35% and 36% respectively. At the other end of the scale, Hobart is just below the national average, with 66% of city centre residents having been born in Australia.

Buying is cheaper than renting in Sydney CBD

Hobart, Surfers Paradise and Perth have the highest mortgage-to-rent ratios in the country, according to the 2011 Australian census. Their CBD residents pay a 37% premium to eventually own their housing.

Median monthly mortgage-to-rent payment difference (Source: 2011 Australian Census data)

In a post yesterday, I suggested that Sydney’s CBD housing may be overpriced relative to the income of their CBD residents. Yet, this chart shows that Sydney CBD residents actually typically pay more for renting than they do for a mortgage (albeit the difference is a paltry 0.3%). Therefore, if you can afford to pay for overpriced housing in central Sydney, you might as well buy it.

Australia's wealthiest city centre residents

Australian cities do exceptionally well in most global liveability surveys and rank highly in terms of cost-of-living. But in what Australian cities do city residents have the most expendable income?

Australian CBD residents ranked by monthly income remaining after mortgage or rent costs are paid

The chart above ranks key Australian city centres in order of median monthly income remaining after their residents have paid their mortgage or rent. At the top of the ranking are the resource state capitals of Perth and Brisbane. Their city centre residents have median non-housing money levels each month of $3,239 and $3,055 respectively. Darwin is not far behind with a whopping $2,991.

Sydney CBD has the highest rent and mortgage levels of all of the city centres, yet its residents earn less than both Perth and Brisbane CBD residents, leaving downtown Sydneysiders with a median $1,755 to spend each month. Melbourne CBD housing costs are the lowest of all of the four biggest Australian cities, however its income levels are also the lowest, leaving its residents with a mere $1,550 to spend in Melbourne’s cafes and bars. As an aside, Melbourne is the youngest Australian CBD, which goes some way to explain the relatively low expendable income levels.

The following table shows the data for all eight cities during the census years of 2001, 2006 and 2011. The data has been adjusted to 2011 levels using Reserve Bank of Australia CPI data to allow a fair comparison across years.

	Sydney	Melbourne	Brisbane	Perth	Adelaide	Darwin	Hobart	Surfers Paradise
2001	$1,770	$1,956	$2,236	$1,778	$2,028	$3,038	$1,835	$1,718
2006	$1,549	$1,408	$2,651	$2,397	$1,815	$2,970	$2,131	$1,948
2011	$1,755	$1,550	$3,055	$3,239	$1,496	$2,991	$2,160	$1,558

Sydney

Melbourne

Brisbane

Perth

Adelaide

Darwin

Hobart

Surfers Paradise

2001

$1,770

$1,956

$2,236

$1,778

$2,028

$3,038

$1,835

$1,718

2006

$1,549

$1,408

$2,651

$2,397

$1,815

$2,970

$2,131

$1,948

2011

$1,755

$1,550

$3,055

$3,239

$1,496

$2,991

$2,160

$1,558

Australian CBD residents ranked by monthly income remaining after mortgage or rent costs are paid, 2001-2011 in 2011 Australian dollars

Note the huge real income increases in Brisbane and Perth between 2001 and 2011, and the general plateauing elsewhere.

But what does this all mean? Some potential side effects could include:

• It could indicate that housing is underpriced in Perth, Brisbane and Darwin, given that their CBD residents can clearly afford more, relative to Melbourne and Sydney residents 
• Or, perhaps housing is significantly overpriced in Sydney and Melbourne? 
• The resources boom is likely to be the main reason for the growth in wealth in Brisbane and Perth CBDs. These cities are the key fly-in fly-out (FIFO) bases in Australia. 
• Perhaps Brisbane and Perth's increase in CBD resident wealth can be partly explained by wealthy people moving in from the suburbs. 
• An increase in demand for luxury goods in Brisbane and Perth can be expected since 2001. Anecdotal evidence of this is visible with the recent introduction and refurbishment of many luxury brand stores in Brisbane and the recent reopening of the Wintergarden indicates a resurgence in higher-end consumption.

If anyone is interested, this measurement is calculated using the following method (underlined values are taken directly from the 2011 Australian census data):

Median Individual Non-Housing Cash Remaining Per Month in 2011 Australian Dollars = (A - B) / G
Median Individual Housing Cost Per Month in 2011 Australian Dollars  = H / G

A = Real Median Household Income (Monthly) = (Weekly Median Household Income * 52) / 12
B = Weighted Median Monthly Housing Cost ($/monthly, Real 2011 levels) = (C * D)+(E *(1-D))
C = Real Median Mortgage Repayment ($/monthly, Real 2011 levels) = Median Mortgage Repayment ($/monthly) * X
D = Mortgage to Rent Count Weighting = Percentage of dwelling structures with mortgage vs rented
E = Real Median Rent ($/monthly, 2011 levels) = (F * 52) / 12
F = (Real Median Rent ($/Weekly, 2011 levels) = Median Rent (Weekly) * X
G = Average Adults Per Household (15 years and over) = Average Household Size * Percentage of residents 0-14 years old
H = Weighted Median Monthly Housing Cost ($/monthly, Real 2011 levels) = (C * D)+(E * (1-D))

X = CPI inflation ratio for year

Melbourne is Australia's youngest CBD

With a median age among residents of only 29 years old, Melbourne's CBD is the youngest in Australia. This is 8 years younger than the national median of 37 years old in 2011. Sydney is next, with residents 5 years younger than the national figure, followed by Brisbane, Perth and Adelaide at 3 years younger.

Median age relative to the national median age in 2011 of 37

In general, this paints a picture of CBD residents being significantly younger than those elsewhere in the country. With the high density, high octane life experienced in city centres, it is hardly surprising it is appealing to younger people.

At the other end of the scale are the cities that appeal to retirement age residents. Tropical Darwin is perhaps unsurprising as having the oldest residents of all capital cities, at 3 years older than the national median.

Surfers Paradise is included, despite not being a capital city, for its sheer size. This presents perhaps the biggest surprise among the data. Surfers is a city with a reputation for youth, yet its figure is older than the national median age, and far above thoat of Melbourne, Sydney and its SEQ neighbour Brisbane. 

Population density in Australian city centres

Melbourne City Centre has accelerated away from Sydney's CBD in the race for inner city population density, as shown in the recently released 2011 census results. In 2001, Melbourne's density was only 5% larger than Sydney's. However the 2006 census showed that Melbourne had accelerated to achieve a density 36% larger. The city further cemented its position as Australia's most dense in 2011 in stretching its lead to 52% greater, with a population density of 14,105 persons per square kilometre.

Population density (persons/sq. km) in Australian inner cities (as defined by ABS Statistical Area Level 2)

With 33,851 individuals living in the area, the larger density of Melbourne City Centre has been achieved despite a smaller population than Sydney's 39,967. This is because it has a far smaller area, at only 2.4 square kilometre versus Sydney's 4.3 square kilometre area. These areas are demarcated by the ABS Statistical Area Level 2 boundaries, and for the purpose of illustration Sydney's is shown on a map below.

Sydney CBD (includes Sydney City, Haymarket and The Rocks), as defined by ABS Statistical Area Level 2

The only non-capital in the collection of cities, Surfers Paradise, presents some interesting results. In 2001, it had Australia's third largest population density at 5,244 persons per square kilometre. However, over the following decade, its population has declined by 1,856, causing a reduction in density. In the meantime, its neighbour 80km to the north, Brisbane, has more than doubled its CBD density to 7,188 persons per square kilometre and comfortably overtaken Surfers Paradise.

The rest of the city centres - those of Perth, Darwin, Adelaide and Hobart - have significantly lower densities in the range 1,359 to 3,112 persons per square kilometre.

Percentage of dwellings four storeys or over

The above graph illustrates the percentage of dwellings that have four storeys or more. This provides a reasonable indicator of both the population and architectural density of each city. However, the anomalous results also highlight some of the weaknesses in this indicator. The ordering aligns closely with the population density figures shown in the graph at the top. The main exception is clearly Darwin, which has a appears to have a far higher proportion of high and medium rise buildings than its lower density siblings of Adelaide and Perth.

However, Darwin's anomalous results can be explained by two factors:

1. It has the oldest population of all of the main Australian cities, with a mean age of 40 in 2011. For comparison, Melbourne's mean age is 29. It is fair to assume that older residents are likely to have less people in each dwelling, lowering density.
2. It can be hypothesised that perhaps most of Darwin's buildings go little over four storeys. This seems like a reasonable assumption given that the city clearly has a limited skyline; certainly when compared with cities such as Sydney, Melbourne, Brisbane and Surfers Paradise. 

The resurgence in city centre living has sparked intense apartment construction and gentrification processes over the past two decades. Higher-density dwellings, usually achieved through height, provide more economical projects for property developers, as long as the demand meets the supply. Increased population boosts activity in the city, particularly after office hours, and increases the perception of safety. The population-increase leads to public sector investment increases and also boosts demand for lifestyle goods and services, which leads to an endogenous feedback loop, further increasing the appeal of city living. The figures shown here demonstrate that this feedback loop is in full effect in Australia, in particular in Melbourne, Sydney and Brisbane. It is also evident in most other cities, such as Adelaide and Perth, albeit to a lesser extent.

Australia: where have the migrants come from?

These graphs present an analysis of results of the “country of birth” question in Australian censuses from 1991 to 2011. The goal is to determine the relative growth in migration from various countries across the timespan, and answer the following question: where have Australian migrants come from in the past two decades?

Two methods have been applied to determine the answer to this question:

1. The positive natural population growth effect has been ruled out by adjusting all annual figures 1991-2006 to 2011 levels
2. All 1991 figures have been weighted to equal 100%. For example, Indonesia has seen a result of 150% in 2011. This means that, as a proportion of the Australian population, Indonesians represent a 50% larger amount than in 2001. 

Australia and European Sources of Migrants

Australia and European countries of birth. Real volumes are relative to 1991 levels.

Of the 21.7 million people in Australia in 2011, 15 million were born in Australia. As a proportion of the population, this amounts to 69% of people, down from 75% in 1991. This proportionate fall equates to a real 8% fall as a proportion of the country from their 1991 levels (represented as 92% in 2011 in the graph above).

The European nations have largely seen steady falls. Greece and Italy have seen an almost perfectly correlated linear fall to only 57% of their 1991 levels. These two nations represent the single largest falls of any nation. It appears the sustained sovereign debt crisis in the Eurozone has done little to increase migration levels to Australia, although admittedly these statistics don't cover the height of the crisis in late 2011/early 2012.

The UK saw significant falls between 1991 and 2001, however this subsequently steadied over the following decade to 2011.  Ireland, however, closely followed the UK until 2006. However, subsequently all of the losses 1991-2006 were reversed to leave Ireland with a slightly larger proportion of the population than in 1991, at 101%. As one of the English-speaking countries hardest hit by the Global Financial Crisis (GFC), this illustrates that Australia has been selected as a primary destination for Irish economic migrants.

East Asian Sources including China

East Asian countries of birth. Real migrant volumes are relative to 1991 levels.

Migration from east-Asian countries since 1991 follows a broadly exponential growth curve. Japan, Indonesia and Singapore has seen very similar levels of real growth in the range 148%-157% of 1991 levels. These levels of growth are steady but significant. Philippines has seen larger levels of growth; not quite in the explosive range, but a nevertheless significant growth to 182% of 1991 levels.

Thailand, South Korea and China, however, head up the group of east-Asian migrant source countries, with 257%, 282% and 318% respectively. All three countries have seen their proportionate representation in Australia accelerate rapidly. Unsurprisingly, Chinese-born migrants, in particular represent both the largest growth rates, and by far the largest absolute figures, with their 318,969 respondents now comprising 1.5% of all people in Australia (up from 0.4% in 1991).

China, South Korea, Thailand, Japan, Singapore, Indonesia and the Philippines combined have seen an increase that equates to 182% of their 1991 levels. This can be interpreted as a near-doubling of the size and influence of east-Asian culture in Australia compared with 20 years ago.

Western and South Asian Sources

Iraq, India and Sri Lanka as countries of birth. Real volumes are relative to 1991 levels.

Last, but by no means least, are the south and western Asian migrant source countries. These countries have even outpaced the growth of east Asian migration. India-born migrants have reached 375% of 1991 levels in Australia, significantly ahead of China in terms of growth rate, and almost catching up in absolute terms with 295,362 born in India. From 1991-1996, the real growth rate of Sri Lankan migration almost perfectly matched India’s. However from 2001 onwards, India has surged ahead of its sub-continental neighbour.

The real outlier here, however, is Iraq. This country has seen truly explosive growth in Australia as a source of migrants. Whilst the absolute count, at only 48,169 is smaller than many countries, this is the result of a huge gain considering in 1991 there were only 5,172 Iraq-born migrants in Australia. The spur for this migration can be identified as the Gulf War 1990-91 and the Iraq War 2003-2011. For example, in 2010-11, 3083 Iraqi nationals were given permanent residence in Australia, of which 2730 (78%) were through the Australian Humanitarian Programme.