Former Prime Minister Tony Abbott has called for Australia to drastically reduce immigration levels from the current 190,000 to 110,000 people each year. He argued that doing so would improve living standards and boost housing affordability for residents.

“My issue is not immigration; it’s the rate of immigration at a time of stagnant wages, clogged infrastructure, soaring house prices and, in Melbourne at least, ethnic gangs that are testing the resolve of police,” Abbott said during a speech at the Sydney Institute. “It’s a basic law of economics that increasing the supply of labour depresses wages; and that increasing demand for housing boosts price.”

Treasurer Scott Morrison has strongly criticised Abbott’s suggestion, saying that drastically reducing Australia’s migration intake would cost the federal budget up to $5bn.

This potentially negative impact on economic growth is one of the main reasons why immigration levels haven’t been slashed, according to Bob Birrell, head of the Australian Population Research Institute.   

“A great point of pride in Australia is our 26 years of unbroken economic growth, and by economic growth, they are referring to overall GDP growth,” Birrell told news.com.au. “Government does not want to lose that growth figure, and it’s also crucial to tax revenue. Extra people consuming things is a major driver to gross domestic product.”

If the population is growing, so is the demand for houses and the products required to cater to the extra people. On the other hand, Birrell acknowledged that strong net overseas migration was responsible for half the growth in households in Melbourne and Sydney.

“It’s a major factor in demand for housing in those two cities and a major contributor to price rises as a consequence,” he said. “If there’s going to be any solution to metropolitan problems [housing affordability, pressure on infrastructure, cost of living increases], the immigration program has to be cut drastically.”

Net overseas migration includes everyone coming in and out of Australia each year, whether they are citizens or migrants.

Morrison clarified that it was temporary migration driving population growth. Hence, the Turnbull government had tightened controls on 457 visas and extended the waiting list for migrants to be able to claim welfare.

Also read: What you need to know about the government’s housing affordability plan