Coalition cuts to skilled migrants would cost country $211 billion

Coalition leader Peter Dutton’s plans to cut the number of permanent visas and slash net overseas migration would help make renting a little more affordable over the next decade, new analysis shows, but would cost state and federal governments billions in lost tax revenue – up to $211 billion over the next 30 years.

“If we were to reduce the pace of migration, we would make housing somewhat cheaper: that would help low-income renters who would find it easier to find a way to put a roof over their heads,” said the Grattan Institute’s economic policy director, Brendan Coates.

Cuts to permanent skilled migration would slash government tax intakes by up to $211 billion over 30 years.Credit: Peter Rae

“But it would also make us poorer, as a community.”

In his budget reply speech last month, Dutton unveiled plans to cut net overseas migration and permanent migration as a core pillar of the Coalition’s housing strategy for the next election.

“We believe that by rebalancing the migration program and taking decisive action on the housing crisis, the Coalition would free up more than 100,000 additional homes over the next five years,” he told parliament in May.

Under Dutton’s plan, permanent migration would be cut from 185,000 to 140,000 for the next two years, then increase to 150,000 in 2026-27 and be 160,000 each year after that. The opposition leader also pledged to cut net overseas migration to 160,000 next year, a 100,000 reduction compared to the government’s planned level.

Modelling from the Grattan Institute found the cut to permanent migration would help ease rental pressures, but there would be little immediate impact because two-thirds of permanent visas go to people already living in Australia.

Over 10 years, that would reduce rents by 2.5 per cent, which in today’s terms would be about $630 a year, or roughly $12 a week, Coates said.

The cut to net overseas migration would have a larger impact, if it were kept at 160,000 permanently, reducing rents by about 6 per cent after a decade. But Coates said this would be difficult to achieve because the federal government had much less control over uncapped temporary visa programs and whether Australians decided to move overseas.

He noted that the changes to migration would need to be permanent or long-term to have that effect on the housing market, but that would also come with a long-term cost to the budget bottom line because of the tax they paid over their lifetimes.

“The existing cohort of 137,000 skilled visa holders that we’ll grant permanent residency to this year, will, over their lifetimes, provide a boost to federal and state government budgets of $34 billion,” he said.

“Now, if you reduce the number of skilled visa holders who are here permanently, then you forego those benefits. And the effect is huge.”

Grattan’s modelling found every permanent skilled visa holder provided state and federal governments $249,000 over their lifetimes in today’s dollars, so reducing skilled migration by 135,000 over the next four years would cost $34 billion over the next four years and $211 billion over the next 30.

“These are the trade-offs. And if that’s a choice that governments or the opposition want to make, they can, but there are consequences: cutting migration is far from costless,” Coates said.

Skills and Training Minister Brendan O’Connor said the Coalition’s migration policy would clearly have a “catastrophic effect” on Australia’s economy, and that the federal government also has plans to reduce migration from its post-pandemic highs.

“We understand that migration is too high, which is why we have a credible and costed plan to halve migration over the next financial year and bring it back to a sustainable level. We understand that skilled migration plays an important role supplying skills to our labour market,” he said.

“Peter Dutton has made it clear he has no plan for the future of Australia, no plan to skill up Australians, no plan to support apprentices and no plan to give industry the skills they’re crying out for.”

Labor will reduce permanent migration from 190,000 to 185,000, which includes nearly halving skilled independent visas while also increasing the number of employer-sponsored visas this financial year.

The government is also closing the Business Innovation and Investment Program visa category under the migration program overhaul, which is expected to make up the majority of the $155 million hit to the budget bottom line over four years from the reduced tax take.

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