Australian immigration push might meet solid opposition

There is a growing debate about Australia’s migrant intake that could reshape economy’s outlook.

Commuters walk through a turnstile at Sydney’s Town Hall train station. Some economists argue that mass immigration would only paper over deeper issues with the Australian economy. Picture: AFP

Australia’s economic growth has long been reliant on high immigration but as Covid-related lockdowns end and the country looks to throw open international borders, there is a growing debate about migrant intake that could reshape economy’s outlook.

Australia closed its borders to immigration in 2020 to curb coronavirus infections, turning net migration negative for the last two years. Before the pandemic, the country was taking in around 240,000 migrants per year, which contributed around two thirds of its population growth.

The topic of immigration returned to the spotlight earlier this month on news that economic advice to the newly-appointed Premier of New South Wales, Dominic Perrottet, included a call for a massive immigration expansion that could bring in 2 million people over five years. The influx would breathe new life into the battered economy and help meet demands for skilled labour.

However, some economists argue that mass immigration would only wallpaper over deeper issues with the Australian economy related to flagging per capita economic growth and stubbornly weak wages growth.

There are calls for a revived economic reform agenda, something that has been lacking for decades, to improve the economy’s underlying health.

As Australians emerge from lockdowns to survey the pandemic’s damage and begin getting back to work, a ramped program of immigration might not be widely welcomed by those seeking a return to employment.

One of the reasons there is a push to return to large-scale immigration in Australia is to fill what is seen as a skills shortage. Higher targeted immigration allows businesses to tap the global labour market for workers, rather than relying on employing Australians, said Stephen Koukoulas, a Canberra-based economist for Market Economics.

As the economy and society adapts to the conditions which will operate in concert with Covid-19, there remain approximately 2 million Australians either unemployed, underemployed or who have recently dropped out of the labour market, he said.

Instead of tapping the international labour market, Mr Koukoulas said there is a critical policy need is for better targeted training, skills and education.

“There is a role for skilled migration in every economy, but relying on it for growth at a time when there is considerable slack in the labour market due to inadequate skills, leads to other problems,” Mr Koukoulas said.

Stalled immigration growth represents the best chance Australia has of getting wages growth up after a decade-long slump, but with a nascent global inflation threat looming, that might not be welcomed as an answer right now.

Businesses are likely to demand higher immigration to fill jobs in areas like engineering, crop harvesting and infrastructure.

Infrastructure Australia, an independent adviser to governments, recently predicted that by mid-2023 more than 105,000 jobs could go unfilled, a situation exacerbated by the fact that state and federal governments have an infrastructure pipeline worth $218bn (US$162bn) over the next five years.

Infrastructure Australia forecasts coming shortages of 70,000 engineers, scientists and architects, with huge shortfalls also tipped for structural and civil trades, and project management professionals.

David Plank, the head of Australian economics at ANZ Bank said the real issue facing Australia is the persistent slowdown in per capita income growth over the past few decades, despite strong immigration.

“Our concern has been that apparently strong headline GDP growth has been boosted by immigration, making it easier for governments to deflect the issue of Australia’s poor GDP per capita performance,” Mr Plank added.

The Wall Street Journal