Victoria has recorded the strongest growth in the past year with Melbourne the fastest growing city, but analysts warn cities must invest in the infrastructure needed to match the surge.
Australia's population is set to explode due to overseas migration with Victoria recording the strongest growth in the past year, according to new data.
The major cities along Australia's east coast - Sydney, Melbourne and Brisbane - accounted for more than 70 per cent of Australia's population growth last year.
The latest Australian Bureau of Statistics figures show Sydney remains the country's largest city with a record 5.1 million residents last year - up by two per cent or more than 101,000 more residents.
But Melbourne is the fastest growing at 4.9 million, an increase of 2.7 per cent, while Brisbane grew by two per cent.
Louise Gates from the ABS says it's the first time the agency has included data on the factors driving population growth in the capital cities and regions.
"So Sydney and Melbourne is mostly net overseas migration so that means more people arrive from overseas than left. In Canberra and in Darwin it's a more natural increase, more babies are being born," Ms Gates explained.
Canberra was up 1.7 per cent and Darwin, Hobart, Adelaide and Perth rose by about one per cent.
Migration experts are not surprised more people are calling Australia home.
Migration agent Julie Williams says climate and standard of living are often the deciding factors when people pick where to live.
"When they're looking at Canada or say New Zealand versus Australia, primarily from our experience and through our clients they tell us that climate is a big factor and just the environment and the freedom they have here in Australia," Ms Williams told SBS News on Tuesday.
Net migration accounted for an extra 80,000 residents in Melbourne and 84,000 in Sydney.
Ms Williams said migrants are keen to explore cities beyond Melbourne and Sydney, but they go where the jobs are.
"What we're finding is that employers are finding it difficult to find the talent pool here in Australia so a lot of them are being attracted through employment.
Melbourne on track to be Australia's biggest city
If Melbourne continues to grow at its current rate it will overtake Sydney's population in about eight years.
Acting Melbourne Lord Mayor Arron Wood was pleased that Melbourne was the "favourite home" of so many.
"Obviously we've got a huge amount of international students who experience the true university town they love the lifestyle and they love the culture and then they choose to stay on."
But a bigger population is not always better. Grattan Institute researcher Brendan Coates says record numbers of new houses are being built but construction is barely keeping up with the population boom in Melbourne and Sydney.
"There's a lot of evidence that we're in a third best world where we've got strong population growth but not the right infrastructure," Mr Coates said.
"In particular, we don't have enough housing to accommodate for that growth and those who are really paying for that growth are younger and poorer people who are being priced out of the market."