What to Expect This Year – Part 1
6 min read
Key takeaways
2025 is a federal election year in Australia, with the Liberal Party, led by Peter Dutton, potentially poised for victory amidst economic dissatisfaction. A rising trend of votes for minor parties and independents (over 31% in the last election) signals discontent with the two-party system, complicating governance and decision-making.
Migration levels are expected to normalise to pre-pandemic averages after the surge caused by backlogs from COVID-19 border closures. Australia faces a continued skills shortage, highlighting the need for targeted immigration policies, particularly employer-sponsored visas and incentives for regional settlement. Tightened student visa requirements may shift focus toward skilled workers over international students filling part-time jobs.
Australia is forecasted to record its lowest fertility rate (1.4 children per woman) in 2025 due to financial pressures, shifting career priorities, and cultural caution. Despite this, the total number of births remains steady due to Millennials entering their prime childbearing years, driving demand for family-sized homes in suburban areas.
Housing affordability remains a critical concern as migration, supply constraints, and high interest rates pressure property prices and rents.
What’s ahead for 2025?
As we begin 2025, the social, economic, and political landscapes in Australia are poised for significant shifts.
While forecasting the future is always fraught with uncertainty, some key demographic and economic trends are emerging that will likely shape the year and in fact, the decade ahead.
In this week’s Demographics Decoded podcast, Simon Kuestenmacher and I started a 3 part series where we explore these trends and their implications for us as a country and for property investors and business people.
For weekly insights and strategic advice, subscribe to the Demographics Decoded podcast, where we will continue to explore these trends and their implications in greater detail.
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A potential political realignment
2025 is an election year in Australia, and a political shift may be on the horizon.
In today’s show, Simon Kuestenmacher explains how recent global trends have shown a tendency for voters to reject incumbent governments during periods of economic dissatisfaction—and Australia appears to be no exception.
Current predictions suggest the Liberal Party, led by Peter Dutton, is well-positioned to win this year’s Federal election.
Interestingly, historical data reveals that the average age of Australian Prime Ministers at election is 54.
This is an age Dutton has just reached, adding a layer of statistical intrigue to Simon’s forecast.
However, dissatisfaction extends beyond the ruling party.
Votes for third parties have steadily increased for decades.
At the last federal election, over 31% of Australians cast their primary votes for parties outside the traditional Labor and Liberal camps.
This rise of minor parties and independents, including the Greens and Teal independents, signals growing discontent with the two-party system.
While this diversification enriches the democratic process, it complicates governance, making it harder for any party to secure a majority or pass legislation unopposed.
Migration: a return to pre-pandemic levels
Migration will remain a central issue in 2025, especially as it intersects with housing affordability.
After a post-pandemic surge in arrivals, spurred by a backlog of migrants accumulated during the border closures of COVID-19, migration levels are expected to normalise in the coming year.
While this might initially sound like a dramatic reduction, it’s more a return to long-term averages rather than a decline in Australia’s appeal.
Despite this stabilisation, questions about Australia’s competitiveness as a destination for skilled migrants linger.
The prolonged skills shortage Australia is going to be experiencing underscores the need for targeted immigration policies, particularly around employer-sponsored visas and incentives for skilled professionals to settle in regional areas.
Additionally, tightening student visa requirements will likely reduce the number of international students, further emphasising the importance of attracting skilled workers for part-time jobs.
Birth rates continue to decline
Australia is on track to record its lowest total fertility rate (TFR) in history, dropping to 1.4 children per woman in 2025.
This is part of a long-term trend driven by several factors:
- Financial pressures: High living costs, unaffordable housing, and economic uncertainty have discouraged many young couples from starting families.
- Education and career priorities: With more women achieving higher levels of education, family planning is often delayed, reducing the window for having multiple children.
- Cultural shifts: A pervasive sense of uncertainty about the future has led to a more cautious approach to parenting.
However, despite the declining fertility rate, the total number of births remains relatively high due to the large millennial population entering their prime childbearing years.
With more Millennials moving into the family formation stage of their lives against moving from inner-city apartments to family-sized homes in the middle and out of suburbs of our capital cities, creating significant demand for three and four-bedroom homes.
Workforce dynamics and employment stability
Australia’s unemployment rate is expected to remain historically low in 2025, hovering below 5%.
This resilience defies traditional economic models, which would typically predict higher unemployment in a high-interest-rate environment.
Several demographic factors explain this anomaly:
- Aging population: Baby boomers are retiring in large numbers, creating job vacancies across industries.
- Parental leave: Millennials, now in their peak parenting years, are taking extended parental leave, temporarily vacating positions.
- Extended education: Younger Australians are staying in education longer, entering the workforce later.
In addition, Australia’s participation rate, the percentage of the working-age population actively employed or seeking employment, is at record highs.
Meanwhile, older Australians are delaying retirement, and many previously inactive workers have rejoined the labour market, further tightening the labour supply.
Housing affordability remains a critical issue
Housing affordability will remain a topic of discussion in 2025, and in particular, it will remain a hot topic as the election comes up.
This is because the interplay of migration, supply constraints, and elevated interest rates will ensure that property prices remain under pressure and rental shortages will continue.
While the government has done a lot of talking, addressing these challenges will require action and a multifaceted approach:
- Boosting supply: Governments and developers need to focus on building more housing stock, particularly in urban and regional areas experiencing the most strain.
- Targeted incentives: Policies that encourage the construction of affordable housing and incentivize downsizing among older Australians could help ease demand.
- Zoning reforms: Streamlining planning processes could unlock new areas for development and reduce construction timelines.
Meanwhile, the role of interest rates will also be critical to the performance of our housing markets in 2025.
At the end of last year, the rhetoric from the RBA suggested interest rates are lucky to fall in 2025 and any downward movement in rates will spur renewed demand in the housing market.
The role of demographics in economic planning
Demographics are the closest thing we have to a crystal ball.
By understanding population trends, we can better anticipate shifts in demand for housing, healthcare, education, and employment.
For instance:
- The aging population will continue to drive demand for healthcare services and retirement living.
- Migration will shape urban planning and infrastructure needs, particularly in growth corridors.
- Falling birth rates may prompt government interventions to incentivize larger families, similar to policies seen in countries like France and Japan.
Preparing for 2025
This is the first in the series of three demographics-decoded podcasts where Simon Kuestenmacher and I share the trends we believe will shape 2025.
As we often say, demographics may not be destiny, but they provide a roadmap to the future.
By analysing these shifts and planning accordingly, we can ensure that we’re not just reacting to change—but proactively shaping the future.
If you found this discussion helpful, tune in again next week for Part 2 and don’t forget to subscribe to our podcast and share it with others who might benefit.
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