Is immigration creating the illusion of Australian economic growth?

Australia’s economy grew during the June quarter, but much of the political comfort offered by the headline figure disappears when the expanding population is taken into account.

It raises an uncomfortable question: is Australia building genuine prosperity, or importing enough additional workers and consumers to keep the national economy growing while individual living standards stagnate?

The Australian economy grew by 0.4 per cent in the June quarter and by 2.1 per cent over the year.

Yet GDP per person was unchanged during the quarter. Labour productivity was also flat and real net national disposable income per person fell by 0.4 per cent.

Australia became a larger economy without producing a corresponding improvement for the average person.

Immigration is not the only reason for that result, but it is an important part of the explanation.

More people create more economic activity

Australia’s population reached 27.8 million at the end of 2025, having increased by 412,500 people over the year.

Net overseas migration accounted for approximately 301,000 of that increase, according to the Australian Bureau of Statistics. In other words, overseas migration produced almost three-quarters of Australia’s population growth.

Every additional resident needs somewhere to live. They buy food, clothing, transport, communications and household services. Many work, pay taxes, study, establish businesses and contribute valuable skills.

All of that activity adds to GDP.

If the population grows by 1.5 per cent and total economic production grows by 2.1 per cent, the economy has expanded. But the improvement available per person is much smaller than the national headline suggests.

That is precisely what the latest figures show. GDP grew by 0.4 per cent in the quarter, while GDP per capita was unchanged.

Migration has not fabricated the economic activity. New residents are real people producing and consuming real goods and services.

The distortion occurs when politicians promote total GDP growth without giving equal prominence to population growth and GDP per person.

Is Labor importing consumers?

It would be too strong to claim, without evidence, that the Labor Government is deliberately admitting migrants solely to manufacture favourable GDP figures.

Australia’s migration system has multiple stated purposes. It supplies workers to industries experiencing shortages, supports universities, reunites families, meets humanitarian commitments and brings skills and capital into the country.

The post-pandemic migration surge also reflected unusual circumstances. Borders reopened, international students returned and employers sought workers after two years of disruption.

Net overseas migration has since declined from its peak. However, it remains substantial.

The federal Budget forecast net overseas migration of 295,000 in 2025–26, falling to 245,000 in 2026–27 and 225,000 in subsequent years. The permanent migration program for 2026–27 has been set at 185,000 places, with the majority allocated to skilled migration.

Net overseas migration and the permanent migration program are not the same measure. Net migration also includes the movements of temporary visa holders, international students, working visitors, New Zealand citizens and Australians entering or leaving the country.

Nevertheless, governments understand that population growth supports aggregate economic growth.

More residents mean more workers, more consumers, more taxpayers and greater demand for housing and services. Migration can therefore help prevent a weak economy from recording negative total GDP growth.

That does not make the growth imaginary. But it does make the choice of measurement politically important.

A government reporting total GDP can say the economy is growing. A household looking at GDP per person, housing availability and disposable income may reach a much less favourable conclusion.

Economic growth is not the same as prosperity

A nation of 28 million people will ordinarily produce and consume more than a nation of 27 million people.

That does not necessarily mean its established population has become wealthier.

Consider a simple example. If Australia’s economy grows by two per cent while its population also grows by two per cent, the country’s total economic output has increased—but output per person has not.

The economy is bigger because there are more people participating in it, not because it has become more productive.

For Australians already living here, the result can be additional congestion and competition for housing without a noticeable improvement in wages, services or purchasing power.

This is why GDP per capita, productivity, real household income and housing availability should accompany every government announcement about economic growth.

Total GDP tells us the size of the economy. GDP per person gives us a better indication of whether economic growth is improving average living standards.

Neither measure is perfect, but reporting only the larger number encourages an incomplete understanding of national progress.

The housing contradiction

Migration becomes politically difficult when population growth runs ahead of housing and infrastructure.

New arrivals did not create Australia’s housing shortage by themselves. Restrictive planning systems, slow approvals, construction insolvencies, labour shortages, expensive materials and years of inadequate supply all contributed.

But rapidly adding hundreds of thousands of people to the population inevitably adds demand.

Migrants need homes immediately. New housing developments, roads, schools, hospitals, public transport and utility networks can take years to approve and construct.

That timing mismatch places greater pressure on the existing supply.

Rents rise when more people compete for too few properties. Buyers face greater competition, while governments struggle to expand services quickly enough.

The latest national accounts contained a positive sign: dwelling investment increased by 1.6 per cent in the June quarter and by 5.8 per cent over the year.

However, one quarter of stronger construction cannot instantly correct years of accumulated shortage or accommodate continuing population growth.

A responsible migration policy must therefore be connected to a credible housing and infrastructure plan. Deciding the migration intake separately from the country’s capacity to accommodate it is not economic strategy. It is merely adding demand and hoping supply eventually catches up.

Migration can lift productivity—but it is not automatic

Migration can improve living standards when it brings skills the country genuinely needs.

Doctors, nurses, engineers, construction workers, scientists, technicians and entrepreneurs can expand Australia’s productive capacity. Younger migrants can also strengthen the workforce and tax base as the population ages.

But a large migration intake does not automatically produce higher productivity.

If workers arrive without sufficient housing, infrastructure or opportunities to use their qualifications, population growth may increase total GDP while doing little for GDP per person.

Businesses may also become dependent on a continuing supply of relatively inexpensive labour rather than investing in training, equipment, automation and better management.

That can suppress the very productivity improvements Australia needs.

The relevant question is therefore not whether immigration is universally good or bad. It is whether the number and mix of arrivals match Australia’s economic needs and physical capacity.

A smaller, carefully targeted program can potentially contribute more to prosperity than a larger intake that overwhelms housing and infrastructure.

Is Australia operating a giant Ponzi scheme?

Strictly speaking, no.

A Ponzi scheme is a fraudulent financial operation in which returns to earlier participants are paid using money supplied by new participants. Immigration is not inherently fraudulent, and migrants contribute labour, taxes, skills, businesses and culture to Australia.

Describing the entire migration system as a Ponzi scheme would therefore be inaccurate and unfair to the people who migrate here under rules established by Australian governments.

But the expression “population Ponzi scheme” identifies a genuine policy danger.

If governments continually rely on new arrivals to expand the tax base, increase consumption, support property demand and prevent total GDP from falling—without improving productivity or building sufficient infrastructure—the model begins to resemble an unsustainable chain.

More people create a need for more housing, services and infrastructure. Meeting those needs can then be used to justify bringing in still more workers and taxpayers. Total GDP continues to rise, while congestion, housing costs and pressure on services accumulate.

The system does not collapse in the technical manner of a fraudulent investment scheme. But it can trap governments in dependence on continual population growth.

That is not a substitute for productivity.

A prosperous country should be able to improve living standards by producing more value per worker, not merely by adding more workers and consumers each year.

Migrants should not be blamed for government decisions

The migration debate must retain an important distinction.

Migrants do not determine Australia’s intake, housing policy or infrastructure investment. Governments do.

People who come to Australia to work, study, join their families or build a safer life are responding to opportunities and visas offered by the nation.

It would be wrong to blame them for rents, congestion or stretched services caused by policy settings over which they had no control.

The responsibility belongs to governments that determine migration levels without ensuring housing construction and infrastructure keep pace.

It also belongs to governments that present aggregate GDP growth as proof of prosperity while giving less attention to the experience of individuals.

The issue is not the worth of migrants. It is the competence and honesty of the policy.

What should government report?

Every quarterly economic statement should give equal prominence to:

• Total GDP growth
• GDP growth per person
• Population growth
• Net overseas migration
• Productivity per hour worked
• Real disposable income per person
• Housing completions relative to population growth
• Changes in congestion and demand for essential services

Such reporting would not end arguments over migration. It would at least make those arguments more honest.

Australians could then judge whether population growth was increasing national capability or merely enlarging the denominator against which shortages must be shared.

The Times View

Labor cannot reasonably be accused, without direct evidence, of admitting migrants solely to create an illusion of economic success.

But the government benefits politically from an economic measurement that population growth helps sustain.

Australia’s 2.1 per cent annual GDP growth sounds reassuring. Quarterly GDP per person of effectively zero tells a different and more relevant story for households.

Both figures are true. Promoting one while neglecting the other risks misleading the public.

Migration can be an economic strength when it supplies necessary skills, raises productivity and is supported by housing and infrastructure. It becomes a weakness when it is used as a substitute for those things.

Australia is not literally operating a giant Ponzi scheme. But it risks developing a population-dependent economic model in which each new intake helps maintain headline growth while adding to the infrastructure and housing demands used to justify further growth.

That cycle cannot be allowed to replace genuine prosperity.

The proper test is not whether migration makes Australia’s economy larger. It plainly does.

The test is whether it makes Australia more productive, more capable and better able to provide rising living standards for everyone who lives here—including the migrants invited to join us.

At present, the GDP figures show that Australia is getting bigger. They do not yet demonstrate that Australians are meaningfully getting ahead.