Cutting migrants won’t ease congestion

Australian cities need infrastructure upgrades.

Three weeks ago, the government announced a cut to the intake of permanent migrants by 30,000 a year. This move was meant to show the nation a willingness to tackle the congestion issues in Sydney and Melbourne.

A simple logic underlies the announcement. Reduce the number of migrants and the traffic infrastructure and our largest cities will be less stressed. This cut in migration is seen as the cornerstone of the government’s “congestion-busting” plan.

Fast-forward two weeks. Last week’s budget suddenly assumes increased net migration figures. These assumptions weren’t much talked about but buried in an appendix of the budget.

Theoretically, the number of permanent migrants can decline while the overall number of migrants increases. That would require a bit of creative accounting while taking in more temporary migrants. All workers, regardless of visa status, clog up infrastructure just as much.

The reason why the budget includes strong migration figures is obvious. The government’s goal of producing a surplus is almost impossible to achieve if migration numbers are cut. Also, it’s far from certain that cutting migration will help alleviate congestion in our biggest cities. Let’s explore why.

In Australia, we run a skilled migration program. We allow foreigners into the country if their qualifications are on the skilled occupation list. This aligns our migration program with the needs of the labour market. Migrants (and local workers) move towards their jobs, rather than jobs following the residential population. Due to the scale of the Australian continent, our population is clustered in a few big cities (whereas in Europe population is distributed more evenly across hundreds of ­medium-sized cities).

Of the net new jobs that were created in Australia between the last two censuses, half were skilled knowledge work jobs. Such jobs tend to cluster in the central business districts. Consequently, our big cities receive an even larger share of the new population.

Melbourne and Sydney combined were home to 41 per cent of the population in 2018 but received 54 per cent of all growth between 2017 and 2018. The two cities received an even larger share of net overseas migration (65 per cent of all new migrants).

Let’s cast the net a bit wider. Our five largest cities (Sydney, Melbourne, Brisbane, Perth and Adelaide) housed 64 per cent of all residents, received 76 per cent of all new population and a whopping 82 per cent of net overseas migration. What might happen if we were to follow through with the government’s migration cuts?

It would be very difficult to deliver a surplus budget. Skilled migrants always boost the economy and no treasurer will want to give up on such an income source.

What about other ministers? The Minister for Cities, Urban Infrastructure and Population is tasked with “congestion-busting”. Surely, minimising traffic problems in Melbourne and Sydney will be aided by lowering migration figures?

Counterintuitively, this almost certainly will not help. Migrants move to Australia for these skilled jobs that tend to be in the business districts of just a few cities.

The big five cities will continue to create jobs regardless of migration policies. Cutting permanent migration figures is likely to dry out the migration streams to regional towns long before growth in Melbourne and Sydney is affected even marginally.

This would be a shame, as mayors and business councils in regional towns want to attract population. Let’s explore which regional towns would miss out on migrants.

Between 2017 and 2018 the population in 22 of our largest 99 towns declined. In all these 99 towns, the number of net overseas migrants grew. Shrinking towns, such as Singleton, Rockhampton and Port Augusta, would have been hit much harder under a reduced migration scheme.

Most (77 of 99) of our largest towns grew over the past 12 months. In 17 towns, more than 80 per cent of population growth was due to migration. This includes Sydney, Adelaide, Wagga Wagga, Horsham, Mackay and Grafton. In 57 of the largest 99 towns, half the population growth was due to overseas migration.

Small towns desperately need overseas migration. When population growth slows, regional housing markets and regional economies suffer.

The government wants to channel migrants away from the big cities into the regions and dreamt up a new visa category to achieve that goal. The new visa requires migrants to live and work in a regional area for four years before they can apply for another visa that would give them autonomy over their housing decisions.

Such regional visas help to fill regional job shortages and has been successfully done already. Regional visas have long been used to ensure foreign trained doctors fill vacant positions in regional hospitals. After a few years working regionally, doctors can choose where they want to practise. Regional visas fill vacant jobs but aren’t creating regional jobs.

This might even backfire and create anti-immigrant sentiment. Meddling with the labour market risks that migrants (for whom enough jobs would be available in the capital cities) are artificially forced into regional job markets where they increase competition. This would provide ammunition to anti-immigrant voices claiming that migrants are taking Aussie jobs (which they aren’t under the current visa regime).

Regional visas should only direct much needed labour to regions that struggle to attract workers. In such a scenario, everyone wins. Migrants work according to their qualifications; regional businesses finally get much needed labour and regional towns grow their population base and strengthen regional housing markets and economies. Regional Australia will benefit from programs that create local jobs more than from programs trying to shift workers into the regions.

The government’s budget already includes the most important ingredient for ensuring economic development in regional Australia. It has budgeted for a generous infrastructure package.

A strong regional infrastructure program will help to link centres to the capital cities through rails and roads. This creates real jobs in the regions (most importantly in construction and related fields) and will help to make regional cities into more ­attractive residential areas for long-distance commuters.

Cutting migration figures will do nothing to bust congestion in the big cities but could seriously harm the regions. The congestion issues in the big cities need to be solved through infrastructure upgrades and a focus on secondary employment hubs outside of the central business districts.

Simon Kuestenmacher is director of research at The Demographics Group.