Over the past two decades Australia has allowed its population to grow without a larger strategic plan. Population outpaced the addition of infrastructure and homes. This nonchalant attitude towards growth is a primary reason for the declining appetite for our high migration intake.
There are countless examples of greenfield developments that weren’t accompanied by adequate infrastructure. Industry experts tend to estimate our infrastructure backlog to be about 20 years.
If we want to create a functioning Australia, a prosperous economy, an affordable housing market, a country where hard work pays off, we must start with the end in mind. In the world of a demographer that means we need a demographic strategy.
It is highly predictable how the existing 27 million Australians are going to age in the coming decades. We know how many births and deaths we can expect each year. We also have a good understanding of how many of our current residents will be leaving the country in the coming decades. That leaves migration intake as the crucial piece of the puzzle.
How many migrants do we want? What type of visas do we want to hand out? What roles do we want migrants to fulfil in the economy? Why are we importing migrants to start with? We either want migrants as workers or as straight up sources of income.
As of 2023, Australia counted 742,000 international students who either commenced or continued their study in the calendar year. Our education providers charged them $17bn in tuition fees, on top of which international students consumed about $31bn worth of goods and services. Some international students also work. The positive interpretation is that they fill gaps in the workforce. The negative reading is that they drive down wages. Overall, international students are a blessing to the economy.
Within this visa category we must weed out bad education providers and rigorously test for English language and academic skills. These are, however, different concerns to the total number of students.
More than five million of the 14.3 million workers in Australia were born overseas. As a rule of thumb remember that one in three workers is a migrant.
We see the importance of the role migrants play in Australia when we look at our future workforce needs.
Jobs and Skills Australia estimates we need to grow the total workforce by two million people by 2034. Over the same time, the ABS retirement intentions data shows that at least 1.6 million people plan to retire. That’s 3.6 million workers we either need to train ourselves (we don’t have nearly enough young people for that), import from overseas, or do without.
Maybe AI, automation, and robots can help us to minimise the need for future workers to a small degree. That would be a welcome development but ultimately we need to grow the pool of workers.
We can’t go down the Japanese path of simply using foreign workers outside of the country to produce wealth.
Japan is a hi-tech manufacturing nation that can just open factories around the world, use foreign labour in foreign nations, and only reimport the profits. Our biggest exports (mining, agriculture, international education, and tourism) all require workers to be in Australia.
Comparing the likely high-migration scenario for 2034 with a purely theoretical no-migration scenario, we see a gap of 4.4 million people and about 2.5 million workers.
We simply cannot go without migration. Maybe we can significantly reduce migration?
In the past few weeks, the Labor premier of Queensland and the federal Liberal opposition leader both argued we should cut back migration significantly to give the residential construction sector a chance to catch up.
After all, every migrant needs to be housed and in times of a housing shortage importing more migrants surely is pure madness.
These comments come after Australia’s record high migration intake last year. The growth was exclusively driven by international students. All other visa categories were below pre-pandemic averages.
We let in so many international students in a single year because they weren’t able to come in the years prior due to Australian and Chinese lockdowns.
The spots for international students are now filled and we will, bit by bit, automatically reach pre-pandemic migration levels. Any suggestion we will see such high migration figures again is pure fear mongering.
It is not a given that minimising the migration intake results in lower house prices. During the pandemic we saw negative net migration and record high rates of house price growth.
Politicians arguing for such drastic cuts to migrant numbers are always very short on the details regarding what visas they are going to cut and by how much exactly.
Also, the downsides of lower migration are conveniently forgotten about. If we cut international students, us taxpayers will need to make up the lack of international tuition funding. If we take in fewer skilled migrants in times of a prolonged skills shortage across most industries, all industry and employer lobby groups are up in arms. Cutting skilled migrants also hurts our efforts to build houses.
There must be other visa groups we can cut instead, right? Visitor visas will not be cut since they don’t occupy housing stock but live with friends and relatives or in a hotel. Working holiday visas are a godsend for regional Australia and won’t be cut either.
We signed international accords promising to hand out a certain minimum of humanitarian visas (asylum seekers). We wouldn’t risk our international standing for the minimal savings to be had in this small visa category. What about family visas? Can we not allow visa holders to bring their spouses or kids along? Not sure how much wiggle room we have here either.
Any government that wants to cut the migration intake needs to make hard choices. Cutting migration does not come without a price. Is either of the plausible future governments willing to pay that price? I would argue no. Talk is cheap and migrants are a very convenient scapegoat. It just happens to be that these non-voters are the main driver of high house prices. Politicians calling for slower migration figures look like they are tackling housing affordability. This way they can avoid making bold housing policy choices that would inconvenience voters.
So there is no need to own up to nonsensical first-home buyer grants (they only drive up house prices and I challenge you to find a single economist arguing the opposite), no need to acknowledge that the states are complicit in the housing affordability crisis through their stamp duty addiction, no need to introduce unpopular but effective land taxes, no need to discuss inheritance taxes, no need to discuss rent control measures, no word about franking credits.
A politician can argue in favour of cutting migration and tick the box of “tackling the housing affordability issue” without the need to discuss any of the politically challenging housing issues.
Bill Shorten lost the unlosable election by essentially telling voters their homes would go down in value because of his reforms. Pollies won’t make this mistake again anytime soon.
The current strong stance on slowing migration can therefore be viewed as being nothing but a pre-election narrative. Before their last election win the Liberals announced bold cuts to migration and Australia ended up seeing record high migration intakes instead.
As long as a politician promising to cut migration doesn’t explain in great detail how the downsides will be managed, I wouldn’t take the message seriously.
What we really need in Australia is a pragmatic approach towards migration that is routed in a demographic strategy. How many migrants do we need to soften the impact of an ageing population? Population growth, housing production, and infrastructure spending must be linked.
Migration must be used in a much more strategic way to channel population flows away from our three biggest cities into regional centres and smaller towns.
Regional visas binding new migrants to smaller towns for a few years, give regional economies a chance to grow. We must be much stricter in ensuring we get workers with the right qualifications into the country and ensure they work in these occupations. The future of our aged care and healthcare systems relies on this. Also, the vast majority of truck, bus, and train drivers will need to be imported from overseas.
The current migration system needs to be reformed but I doubt that a significant minimisation of the total migration intake will be part of such reforms.
Simon Kuestenmacher is co-founder and director of research at The Demographics Group
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