“Cooling Jobs Market, Rising Housing Costs”: Australia’s Immigration Clampdown Tests Its Ability to Balance Labor Supply and Demand

Australia’s government and opposition intensify competing efforts to curb immigration
Rising unemployment and housing shortages weaken the case for higher migrant intake
Continued reliance on overseas workers in construction and healthcare fuels concerns over potential fallout

Australia is tightening its immigration rules. A surge in arrivals from overseas following the COVID-19 pandemic has intensified housing shortages and affordability pressures, while rising unemployment and slowing hiring demand have reduced the need for additional labor, prompting both the government and the opposition to prioritize cuts to migrant intake. Within the government, however, concerns remain that across-the-board reductions could disrupt housing construction and the recruitment of essential service workers, given the substantial reliance on overseas labor in critical sectors such as construction, healthcare and care services.

Australia’s Opposition Proposes Sweeping Immigration Cuts

According to a roundup of major media reports on October 7, the opposition Liberal–National Coalition announced a policy on October 6 to sharply reduce temporary and humanitarian visas and overhaul the immigration system to prioritize skilled workers. At a press conference in Sydney, opposition leader Angus Taylor of the Liberal Party described the proposal as “the biggest cut to immigration in this country’s history,” arguing that it would “ease pressure on roads, schools, infrastructure and housing, and give the country the breathing space it needs.”

If elected in 2028, the opposition plans to reduce annual net overseas migration (NOM) to 100,000 during its first two years in office, followed by modest increases to 130,000 in the third year and 160,000 in the fourth. According to the Australian Bureau of Statistics (ABS), net overseas migration totaled 292,100 in the year to March. The Coalition also intends to reduce the number of temporary visa holders by 650,000 over four years from 2028 and effectively abolish the Temporary Graduate visa, which allows international students to remain and work after graduation. It would also halve the annual humanitarian intake, including refugees, to 10,000. Australia’s public broadcaster ABC reported that, if implemented, the pledges would bring migration to its lowest level since 2004, excluding the COVID-19 pandemic period.

Labor Government Also Tightens Restrictions

The incumbent Labor government, led by Prime Minister Anthony Albanese, has also formally set targets to reduce annual net overseas migration to 245,000 in the 2026–27 financial year and 225,000 in 2027–28 to contain the post-pandemic surge in arrivals. To that end, it plans to restrict visas for family members accompanying new international students, with limited exceptions, and allow additional student visas after graduation only for those pursuing a higher-level qualification than their previous degree. Tourist and visitor visas would generally carry conditions preventing holders from applying for another visa within Australia to extend their stay. The government will also step up enforcement against foreign nationals whose permission to remain has expired and intensify scrutiny of migration agencies that facilitate poorly substantiated visa applications.

In addition, Home Affairs Minister Tony Burke announced last month that a ballot system would be introduced for second- and third-year working holiday visas to limit extended stays. Under the existing system, holders could apply for a second-year visa after completing at least 88 days of work in designated regional areas and a third-year visa after working for at least six months during their second-year stay. Under the new rules, even applicants who meet those requirements would have to be selected in the ballot to extend their stay. The government has proposed annual caps of 45,000 second-year visas and 5,000 third-year visas. Those figures are approximately 21% and 84% below last year’s respective totals of 57,000 and 31,000.

Australia’s Labor Market Landscape Shifts

Changes in the labor market appear to underpin Australia’s tighter immigration stance. The country has long relied on large migrant inflows to alleviate domestic labor shortages. As economic activity resumed after the COVID-19 pandemic and employers’ hiring needs surged, the government accelerated efforts to attract overseas workers, including skilled migrants, international students and working holiday visa holders. In agriculture, tourism, construction, healthcare and care services, foreign workers helped meet labor demand that the domestic workforce alone struggled to satisfy.

Recently, however, the incentive to sustain that overseas recruitment strategy has weakened. Employment figures released by the ABS last month showed that Australia’s seasonally adjusted unemployment rate rose to 4.6% in August, up 0.2 percentage points from July and 0.4 percentage points from a year earlier. The number of unemployed people reached 722,900, an increase of 80,000, or 12.4%, year on year. The composition of employment also showed signs of deterioration: part-time employment rose by approximately 46,000 during the month, while full-time employment fell by about 6,000. Employers’ hiring demand is also weakening. According to data released by the ABS on October 1, total job vacancies stood at 325,000 in August, down 0.9% from the previous survey in May and 1.3% from a year earlier.

Table 1. Factors Behind Australia’s Tighter Immigration Restrictions

Housing Insecurity Continues to Deepen

Severe housing shortages also appear to have contributed to the tightening of immigration restrictions. Arrivals from overseas increased rapidly after Australia reopened its borders following the COVID-19 pandemic, but new housing supply failed to keep pace with population growth. According to a report released by the National Housing Supply and Affordability Council (NHSAC) in May last year, 177,000 new homes were completed in 2024, approximately 46,000 fewer than the estimated demand of 223,000 homes over the same period. The council identified construction labor shortages, high material and financing costs, low construction productivity, and complex land-use and development approval processes as obstacles to expanding housing supply.

Housing affordability pressures have also intensified as demand for rental accommodation has concentrated in major cities such as Sydney and Melbourne. According to a report released by the NHSAC in April this year, rent under new leases accounted for a record 33% of median household income last year. The time required to save for a mortgage deposit also increased to 11.2 years, while principal and interest payments on new mortgages amounted to 45.9% of median household income. The NHSAC concluded that persistent shortfalls in new housing supply were keeping both home purchase and rental burdens elevated.

The Potential Fallout from Immigration Cuts

Within the Australian government, however, concerns have emerged that indiscriminate immigration cuts could exacerbate the housing crisis. Appearing on Sky News’ “Sunday Agenda” in June, Burke stressed the need to balance migrant inflows with the country’s capacity to supply housing. “We must keep doing everything we can to increase housing supply, and immigration policy needs to be adjusted accordingly,” he said. “But if we approach immigration the wrong way, we could make the housing situation worse.” More than a quarter of the tradespeople involved in housing construction in Australia and approximately 60% of general practitioners (GPs) were born overseas, he explained, meaning that across-the-board immigration cuts could disrupt labor supply in essential industries.

Burke said the government had already reduced net overseas migration by 45% from its 2023 peak and would continue making adjustments in line with national workforce needs and housing supply conditions. “We will not create a situation in which we cannot secure the workers needed to build homes or find doctors, particularly in regional communities,” he said. “Some parts of the Australian economy are absolutely dependent on immigration, and we have no intention whatsoever of putting them at risk.”