As Balifrog says, vast areas uninhabitable areas. Actually reckoned at about 90%. The coastal areas mostly towards the south have about 80% of the population with 70% of the population living in the capital cities. Theoretically there is still penty of room for housing but historically, since first European settlement, the useful land was seen as valuable and allotted by the rulers to the monied members of the community. Profit opportunites in development has driven most of the housing constructions. Various governments have set up housing and building programs but always lagging well behind the overall needs. Conservative governments allowed people with extra wealth to get major tax concessions buying up houses and Since the 1980's this has led to enormous increases in the value of houses and rents. Labor governments have been too frightened of losing the middle class vote if they removed tax advantages although the relatively new, Federal Labor government has been considering taxes for mutliple home ownership. Meanwhile, inflation rates across the spectrum of the cost of living and ever increasing rental costs has led to a surge in homelessness and people being unable to afford the standard of accommodation to which they became accustomed. There is an ongoing economic crisis which governments have yet to really appreciate just how serious this has become and will continue to hammer more and more people into poverty.
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Shortage of water is usually quoted as the major constraint and certainly the area with below say 300mm rainfall is vast. But conversely the area with a moderate 600-1000mm is also substantially larger than the area in this range in UK which houses 90% of our 70m
Obviously though this is not the whole story, with soil quality and climate important factors.
The comparison with Israel is instructive, where both populated and cropping areas receive a fraction of the rainfall similar areas of Australia enjoy. But who recycle domestically and manage farming far more effectively
Australia is in part a prisoner of its demographic history. Across the other continents the potentially liveable land has been progressively tamed over thousands of years and is now quite adapted to supporting human life and endeavour. A good illustration is Australia virtual lack of attractive secondary centres concentrating all activity and population in now over crowded state capitals.
Other developed countries are now seeing steady dispersion away, not to remote areas but to more attractive old established towns and cities within the region with the capitals focusing on government, high finance/legal, opera houses! and tourism.
Australia not having these, is following a more typically Asian pattern of the magnetic mega city. Jakarta now 30 - 40m having swallowed it's neighbouring conurbations.
Housing seems to be an increasing expense and issue everywhere. The sort of new house a young family might aspire to in an outer Sydney/Melbourne suburb is probably a little cheaper than typical across SE England generally, while much cheaper than one say an hours train commute from London. And the house will be bigger (but worse built) While salaries are higher. Away from big city commute zones housing in Australia still seems cheap. Canada US & most West Europe have similar high housing costs
Governments have not helped anywhere with ever changing policies designed to favour this group of voters or that. What we all need is more houses built, anything else is merely rearranging the deckchairs on the Titanic