CLOSING DOORS: AUSTRALIA’S HOUSING CRISIS AND ITS CONSEQUENCES FOR ASIA

How Australia’s Housing Crisis is reshaping its politics, closing its doors, and reordering its place in Asia

By Sisaru Diyunuge

Imagine paying over half of your take home pay simply to keep a roof over your head.

Imagine being a nurse, a teacher, or a tradesman or woman – the very people any society depends on to function and still being unable to afford to live within an hour’s commute of where you work. This is daily life for hundreds of thousands of Australians today. Australia, long celebrated as one of the worlds’ most livable nations, is navigating a housing crisis so significant that it had begun to strain the social contract, reshape its politics, and in ways that matter directly on how Australia engages with all of Asia.

The story of how the ‘lucky country’ - what Australia is commonly referred to as; how a wealthy western-democracy arrived at this juncture is complex. It involves decades of political miscalculation, an addiction to property as the primary vehicle of national wealth, the economic arithmetic of post-COVID migration, and a construction industry that has consistently failed to build enough homes. Yet in the overheated language of electoral politics, this complex story has been distilled to a single, incendiary word: immigration.

The consequences of that distillation reach beyond Australia’s shores. For the approximately 200,000 plus Sri Lankans who call Australia home and the 1,000,000 plus Australian-Sri Lankans – the political weather is shifting in ways that are already tangible and may grow significantly more so. For Sri Lanka and Asia at large, Australia as a partner in trade, education, and diaspora remittances would demand careful attention moving forward.

The Making of a Crisis

Australia’s housing crisis was not a result of an overnight change in policy. Policies which favoured the interests of existing property owners over those who had yet to enter the market were introduced at least three decades ago.

The fundamentals are straightforward: the pace at which homes were built was not commensurate with the increase in population. The reasons are multi-faceted and intertwined: restrictive zoning rules that prevent higher-density housing in desirable urban areas, as slow and fragmented planning approval systems spread across hundreds of municipal councils, a building sector plagued with labour shortages and rising material costs, and a tax system that, through policies such as negative gearing and the capital gains tax discount, has consistently incentivized the purchase of investment properties over the construction of new ones.

The tax incentives deserve particular scrutiny. Negative gearing is the ability to offset losses on an investment property against other income. And the halving of capital gains tax (a levy on the profit made from selling an asset) on assets held for more than a year have effectively made the Australian property market a subsidized investment vehicle. This has driven prices higher, enriched those already on the property ladder, and made entry progressively more difficult for those who are not.

The COVID-19 pandemic added its own disorienting chapter. When Australia closed its borders in 2020, international students and temporary migrants departed en masse. Population growth slowed dramatically. One might have expected house prices to fall. They did not. Instead, prices surged by roughly 25 per cent in little over a year – a period of historically low immigration. This inconvenient fact is rarely mentioned in political discourse, yet it demolishes the simplest version of the argument that immigration is the primary driver of unaffordability.

The Political Explosion

Into this volatile environment has stepped Pauline Hanson and her One Nation party, offering an explanation that is simple, emotionally resonant, and arguably misleading. The argument is essentially this: too many migrants are competing for too few homes, and the solution is to drastically reduce immigration.

One Nation is not a novel phenomenon. Ms Hanson first came onto the Australian political scene in 1996 after winning a lower house legislative assembly seat for a rural electorate in the state of Queensland. Immediately thereafter, her rhetoric of anti-immigration and anti-Aboriginal platform was made clear. She was eventually sidelined by the Liberal party which represents the traditional center-right, only to return in 2016 to the upper house of the Australian federal Parliament as a senator with renewed relevance. But what is happening in 2026 represents something qualitatively different: a potential structural realignment of Australian politics rather than a cyclical protest vote. In the 2025 federal election, One Nation received roughly 6 per cent of the primary vote, a modest result. But the tremors began almost immediately after Australian Labour’s landslide victory after the popularity of the traditional center-right Liberal party started to slip amongst rural and outer-suburban conservative voters to One Nation and as well as more affluent, university-educated and/or white-collar urban voters who now moved to an alternative political force to One Nation and the Liberal Party commonly referred to as the “Teal Independents” with a more centrist, pro-market attitude.

Post-election surveys conducted by researchers at Macquarie University and the Australian National University found that 60 per cent of respondents believed immigration had gone too far or much too far. Among One Nation voters and supporters of the small far-right Trumpet of Patriots part, that figure approached 90 per cent. Significantly, anti-immigration sentiment is not confined to the elderly or the economically marginalized. Among Australians aged 18 to 34, a demographic that has borne the sharpest pain of housing unaffordability, 32 per cent identified immigration as a leading cause of their predicament.

What makes the numbers particularly striking in a global context is that Australia has compulsory voting. Every eligible citizen must cast a ballot. This is not a case of a motivated extremist minority turning out while the moderate majority stays at home, as has happened in some European and American political upheavals. When one in four Australians indicate they would currently vote for One Nation, including people who might not advertise that preference to neighbours or colleagues, but who mark it nonetheless in the privacy of the ballot box.

The sociological profile of One Nation voters has also evolved. While the party’s base has historically been male, mostly rural, and blue-collar, economically insecure workers who on most measures of class interest are indistinguishable from Labour voters – the housing crisis has extended its appear into the outer-suburbs and among song younger renters who feel permanently locked out of the dream their parents took for granted.

Analysts note that since 1993, the combined vote for candidates outside the two major parties has risen from under 11 per cent to nearly 34 per cent in 2025. For the first time in polling history, a member of the traditional two-party duopoly – the Liberal Party – recorded a lower primary vote than a minor party. The era of rusted voters reliably supporting Labor, or the Liberal Party and their rural coalition partner the Nationals Party appears to be ending, and One Nation is the primary beneficiary on the right.

The Gas and the Kitchen Table

To understand why Australia’s housing crisis extends so far beyond its borders, one must understand the peculiar economics of Australian prosperity- and the tensions those economics are now generating.

Australia is, in one sense, extraordinarily wealthy. It sits atop some of the world’s largest deposits of iron ore, coal, and natural gas. These resources have been the engine of economic growth for decades, and their primary customers are in Asia: China, Japan, South Korea, India and Taiwan. More than 80 per cent of Australia’s coal exports flow to these markets. Iron ore, the steel-making raw material extracted primarily from Western Australia, goes overwhelmingly to China – in 2023, China purchased 84 per cent of Australia’s iron ore exports, which in turn accounted for nearly a quarter of all Australian export revenue. In short, the Chinese construction and manufacturing boom built much of the financial comfort that Australians have enjoyed, and that comfort is now threatened by its own internal contradictions.

Liquified natural gas (LNG) paints a revealing story, and one that is generating significant and underappreciated domestic tension. Japan is Australia’s largest LNG customer, importing approximately $39 billion in 2024 alone. These are multi-decade contracts, negotiated over years, underpinned by massive Japanese investments in Australian export infrastructure. Japan’s Inpex Corporation operates Ichthys LNP project in Australia’s Northern Territory, which at the time of its approval represented the single largest overseas investment ever made by a Japanese company.

The problem is that ordinary Australians are paying sky-high energy prices while this gas flows offshore under long-term contracts. Critics argue that Australia exports gas at favourable rates to Japan and South Korea while domestic consumers and businesses faced among the highest energy costs in the developed world. A 2025 analysis found that Japanese companies resold between 10 and 13 million tons of Australian LNG in that year alone. In plain terms: Japanese intermediaries were on-selling Australian gas to third-party markets at a profit, while Australians struggle to heat their homes.

The relationship is further complicated by climate politics. Australia’s Labor government has pledged significant emissions reductions by 2035 yet continues to approve LNG expansion projects backed by Japanese investment. When the government applied the ‘Safeguard Mechanism’ — a policy requiring large industrial emitters to reduce or offset carbon emissions — Japan’s senior energy executives publicly warned that this threatened the reliability of supply. It was an extraordinary intervention by a foreign corporate interest in Australian domestic policy, and it did not go unnoticed by Australian voters already skeptical of globalization. Critics have accused the Australian government of prioritizing the interests of foreign energy corporations over those of its own citizens.

Queensland’s unilateral increase of coal royalties in 2022 similarly provoked the Japanese Ambassador to Australia to issue a public rebuke — a rare breach of diplomatic protocol that underscored how deeply Asian governments view Australian resource policy as a shared concern. These episodes have fed a narrative, particularly on the populist right, that Australian politicians have sold the country’s resources cheaply to foreign buyers while ordinary citizens are locked out of affordable housing and paying excessive energy bills.

China, Iron, and the Weight of Dependence

Further, the iron ore relationship with China is existential. No comparable economy in the modern world depends as heavily on a single export to a single customer as Australia depends on iron ore sales to China. When China in 2020 imposed sweeping trade restrictions on Australian goods such as barley, wine, coal, lobsters as retaliation for Australia’s call for an international inquiry into the origins of COVID-19, Australian agriculture suffered severely. Yet the broader economy held up, partly because iron ore was never restricted: Beijing needed it too much. The episode demonstrated both Australia’s vulnerability and its leverage. China purchased 69 per cent of global iron ore exports in 2023 — finding alternative buyers for Australian supply would be extraordinarily difficult. This mutual dependence has produced what analysts describe as a peculiar intimacy: two countries with deepening strategic differences and a profound economic codependency neither can easily escape.

The Albanese government, elected in 2022, successfully normalized relations with Beijing, and by late 2024 virtually all trade restrictions had been lifted. But the underlying structural anxieties remain. As China’s property sector slows — the construction boom that drove steel demand and therefore iron ore demand is cooling — Australia’s export revenue faces structural headwinds that no diplomatic normalisation can fully address. The mining wealth that has subsidised Australian living standards and insulated governments from making hard housing-policy choices may be entering a period of decline precisely as the domestic political pressures it has obscured become impossible to ignore.

What This Means for Sri Lankans in Australia

Against this backdrop, the situation of Sri Lankans in Australia — people spanning citizens, permanent residents, temporary workers, and students is increasingly precarious.

Sri Lankans have built a remarkable presence in Australian professional life. Between 2020 and 2024 alone, more than 15,000 Sri Lankans entered Australia through skilled migration programmes, making the community the sixth largest in the skilled employment visa category. In 2024, more than 32,000 Sri Lankan students held Australian student visas, making Sri Lanka the eleventh largest source of international students in the country. The city of Melbourne in the State of Victoria has become home to a dense Sri Lankan community. Professionals in medicine, engineering, finance, information technology, and education — fields where Australia faces genuine shortages — form the backbone of the Sri Lankan diaspora.

Yet the political climate is changing in ways that affect even those who are already there, and that are closing doors on those who wish to come. In February 2026, Australia’s Department of Home Affairs recorded a 38 per cent refusal rate for Sri Lankan higher education student visa applications — placing Sri Lanka among the five countries with the highest rejection rates globally, behind Nepal (65 per cent), Bangladesh (51 per cent), and India (40 per cent). As recently as late 2025, Sri Lanka had enjoyed ‘Evidence Level 1’ status under Australia’s Simplified Student Visa Framework, meaning streamlined processing and minimal documentation requirements. By January 2026, Sri Lanka had been downgraded to Level 2, ending the minimal-evidence era for most applicants.

The official reason given is integrity: concerns about fraudulent financial documentation and ‘search fund’ schemes in which funds are temporarily moved to pass verification checks. These concerns are real and not confined to Sri Lanka. But the broader context is unmistakable.

Australia has signaled that student visa programmes are no longer treated solely as educational pathways but also as ‘a key lever of migration control.’ International student numbers are being used as a tool to reduce net migration figures in response to domestic political pressure driven in no small part by housing unaffordability.

The practical consequences for Sri Lankan families are severe. Each rejected applicant loses a non-refundable visa application fee of approximately AUD 2,000 and must decide whether to reapply, pivot to Canada or the United Kingdom, or abandon overseas study entirely. Australian universities, meanwhile, risk missing enrolment targets in postgraduate programs that have historically relied heavily on South Asian students. The education consultancy sector in Colombo warns that repeated policy shifts and opaque assessment criteria are eroding trust in Australia as a destination, potentially causing long-term reputational damage that outlasts any political cycle.

For Sri Lankans already in Australia as temporary residents or on bridging visas, the uncertainty is of a different and rather sinister nature as they are in permanent limbo. Processing times for permanent residency applications have lengthened substantially. The political noise around immigration has translated into a bureaucratic culture of heightened scrutiny, where caseworkers apply discretion more conservatively than in previous years. Community organisations report growing anxiety among Sri Lankan families who have built lives in Australia over years or decades, but whose immigration status remains unresolved.

The rise of One Nation is not yet a governing proposition, but it shapes the political environment within which all parties operate. When 60 per cent of the electorate believes immigration has gone too far, mainstream parties — the governing Australian Labor party included — respond by tightening policies rather than defending the economic and social case for migration. The result is a ratchet: the political pressure moves in one direction only, and the Sri Lankan community, like other migrant communities, bears the costs of a debate it had no part in creating.

Will Australia Turn Transactional?

The question that should concern policymakers in Colombo — and in most Asian capitals — is whether the political forces now reshaping Australia will produce a country that is more transactional in its engagement with the region: willing to sell coal and LNG and iron ore, but increasingly reluctant to accept the people, students, and cultural exchange that give substance to genuine partnership.

There are reasons to worry about the One Nation worldview — and, to a lesser but still significant degree, the mainstream political response to its rise — tends to separate ‘good’ trade from ‘problematic’ immigration. Resources can be exported; gas can be contracted; iron ore can be shipped. These transactions create wealth, or at least the illusion of it, without asking Australians to share their neighborhood, school, or suburb. People are more complicated. They need housing. They change the character of communities. They are visible in ways that a cargo vessel departing from Port Hedland is not.

This division is, in important respects, a false one. Australia’s multicultural communities, including its large Indian, Chinese, Vietnamese, and Sri Lankan diasporas are precisely the soft-power infrastructure that gives Australian engagement with Asia its depth and credibility. The Australian Department of Foreign Affairs and Trade’s own 2025 strategic snapshot acknowledged that the country’s multicultural communities provide ‘insights, skills and perspectives’ that strengthen its engagement with the world. The $33 million ASEAN-Australia Centre, recently established to build business, educational, and cultural connections with Southeast Asia, exists because Australia’s policymakers understand that trade alone does not build durable partnerships.

But understanding and political practice are increasingly divergent. A government that responds to One Nation’s rise by cutting student visas and tightening migration is, whether it intends to or not, dismantling the human architecture of the very relationships it simultaneously claims to be investing in.

The LNG and gas contract controversy adds a further layer of irony. At precisely the moment when ordinary Australians are questioning whether the country’s resource export arrangements serve Australian interests, Australian governments are under intense pressure from Asian energy corporations to maintain and extend those same arrangements. The result is a political economy in which fossil fuel exports to Asia are protected — because the industry employs 215,000 Australians and generates enormous government revenue — while the human connections that give Australia’s Asian relationships their social and cultural dimension are quietly eroded.

What Sri Lanka Should Understand

For Sri Lankans reading this from Colombo or Kandy or Galle, the implications are practical as well as strategic. In the near term, students and families considering Australia as an education destination should approach the process with greater care and documentation than was previously required. The era of straightforward approvals is, for the time being, over. Financial evidence must be meticulous and verifiable. Academic progression plans must be credible and well-documented. Those who have family members already in Australia on temporary visas should seek legal advice about their pathways to permanency, as processing environments have grown less forgiving.

More broadly, Sri Lanka’s government should be actively calibrating its education and labour migration strategies to reflect a world in which Australia is one option among several rather than the default choice it was for a previous generation. Canada, Germany, and the United Kingdom are actively competing for the same skilled Sri Lankan professionals and students. Australia’s political turbulence creates market space that other countries are moving quickly to fill.

On the bilateral relationship more broadly, Colombo should resist the temptation to assume that the Australia it has known — an enthusiastic champion of regional integration, people-to-people exchange, and multicultural engagement — is necessarily the Australia of the next decade.

Diplomatic relationships with Australia must be sustained and deepened precisely because they are under pressure, not because they can be taken for granted. The Sri Lankan community in Australia, large and professionally accomplished, is itself a form of diplomatic resource — a bridge that should be cultivated by both governments, not left to navigate hostile political weather alone.

There is also a cautionary tale here for Sri Lanka’s own development. Australia’s housing crisis is in significant part the result of treating property as a primary investment vehicle, of failing to build social and affordable housing over decades, of allowing planning systems to prioritize the comfort of existing owners over the needs of future residents. These are not uniquely Australian temptations. Any rapidly urbanising economy that allows housing markets to serve investment rather than habitation risks arriving, eventually, at the same destination.

Conclusion: The Cost of Simplicity

Australia is a country trying to solve a complex, multi-generational problem with a simple, emotionally satisfying but empirically inadequate answer. Housing unaffordability is real and acute, and its effects on working Australians — particularly the young — are genuinely devastating. But its causes lie in decades of tax policy favoring investment over construction, planning systems that protect the interests of existing owners, a construction sector ill-equipped to scale, and a post-COVID rebound in migration occurring into an already depleted housing stock. Although, the 2026 federal budget brought in sweeping changes to the capital gains tax and negative gearing, making it more favorable for future generations to enter the housing market.

The political response to blame immigration, to channel that blame through parties like One Nation, and to respond with visa restrictions and migration caps is arguably the path of least resistance. It does not build a single additional house. It does not reform a single zoning regulation. It does not change the tax treatment of property investment. But it is visible; it is politically legible, and in a system of compulsory voting, it can command a majority.

The consequences of this path extend far beyond Australia. For Sri Lankans in Australia, it means greater uncertainty, more scrutiny, and harder pathways to permanency. For Sri Lankans hoping to study in Australia, it means higher rejection rates and more expensive, more bureaucratically demanding applications. For Sri Lanka as a country, it means a partner in the region that is gradually retreating from the human dimension of its Asian engagement, even as it insists on maintaining and expanding its resource export relationships.

Australia will remain an important country. Its resources, its institutions, and its geographic position in the Indo-Pacific ensure that. But the Australia that emerges from this political moment may be a smaller version of itself: more suspicious, less generous, more transactional, and ultimately less equipped for the kind of partnership that the Asia-Pacific’s uncertain future will require.

The house prices are real. Anger is real. What is being lost, quietly and without fanfare, is something harder to measure and far harder to rebuild.

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