Do the maths; high migration isn’t an economic positive

The migrant experience today is different to that of more than twenty years ago, when their commitment to Australia was generally very strong. Picture: AAP

Over the years, I have written a great deal about the economics of immigration. Don’t get me wrong, I’ve never thought economic considerations should be the primary driver of a country’s immigration policy.

This should be dictated by the kind of society we want to be and the requirement for social cohesion. A country’s immigration policy should reflect the preferences of its citizens; it shouldn’t be driven by the self-serving entreaties of vested interest groups.

The reason theeconomics of immigrationmatter so much is the argument that the economic benefits of immigration are so substantial that the downsides of accepting large migrant intakes just need to be managed.

The purported gains include increases in real incomes, meeting skill shortages, the attenuation of ageing and greater tax revenue. In practice the economics of immigration, along with many dubious empirical studies, have been used to justify governments accepting large numbers of migrants without public approval. The evidence is overwhelming in Australia: the public wants lower migrant intakes and has done so for some time.

Anthony Albanese delivers a press conference at Donnybrook in Melbourne. Picture: Luis Enrique Ascui

Survey after survey underscores this point but governments of every persuasion have refused to be swayed.

Higher migrant intakes enlarge the size of the economy but do not necessarily increase per capita output, at least in the short term. Higher intakes lead to an immediate capital shallowing and lower productivity, at least until capital formation can catch up. This can take as long as 20 years. The more skilled and younger are migrants, the greater the economic gains. But these gains largely accrue to migrants themselves rather than to the population at large. Most migrants, particularly those entering under temporary visas, are not skilled.

The fiscal impact of migration depends on the composition of the migrants. Humanitarian migrants impose a large fiscal drain while only some skilled migrants generate more tax revenue than they receive in direct and in-kind benefits. Because migrants age, the impact of immigration on the age profile is inconsequential.

Do these economic considerations provide a real basis for a government overriding the legitimate preferences of citizens when it comes to determining the size and nature of a migration program?

A similar question was raised by Douglas Murray in his book, The Strange Death of Europe: Immigration, Identity, Islam, published in 2017. According to Murray, “it has been claimed that immigration is an economic benefit for our countries; that in an ‘ageing society’ increased immigration is necessary … and that globalisation makes mass immigration unstoppable”. He carefully examines some of the key economic reports used in Britain and other European countries to support the case for large migrant intakes. In particular, he notes the use of “exceptional cases” – the migrants who succeed in magnificent ways by earning large sums and establishing businesses. But these exceptional cases deliberately camouflage the large number of migrants who don’t succeed and remain dependent on government welfare benefits year after year.

British journalist and political commentator Douglas Murray. Picture:

In Germany, for instance, more than half of the income support benefits provided by the state are taken up by migrants although migrants make up less than one-fifth of the population.

When it comes to Australian studies, the same bias is clearly detectable. There is even a section of the Treasury, the Centre for Population, that regularly churns out reports favouring high rates of immigration. But it is entirely possible to reach different conclusions.

Consider the Treasury’s estimates of the lifetime fiscal impact of different types of migrants. When it comes to primary skilled migrants, particularly those sponsored by employers, there appear to be substantial net fiscal gains.

But very quickly the fiscal impact becomes negative when secondary skilled, family and humanitarian visa holders are considered. The net fiscal drain of each humanitarian visa holder is close to $400,000. Note that these estimates don’t include the costs borne by the states and territories.

A similar study conducted recently by the UK Office for Budget Responsibility estimates that low-paid migrant workers in Britain cost the taxpayer more than $300,000 by the time they retire.

Pro-immigration economists will highlight the economic benefits of young, skilled migrants while failing to add that these migrants make up a small proportion of the total intake. Net overseas migration until recently hovered at 500,000 a year but the permanent skilled migrant intake makes up a little more than 130,000 of this total and this latter number includes secondary applicants, mainly accompanying spouses. Do the math – most migrants entering the country don’t make a positive fiscal contribution.

It is also clear that many temporary migrants, including international students, are happy to game the system to stay in the country. This has led to a huge build-up in the number of appeals against rejected visa applications.

At the end of 2024 there were more than 80,000 pending appeals before the Administrative Review Tribunal compared with 14,000 a decade ago. The cost of this process is borne by taxpayers and the migrants get to stay in the country in the meantime.

The e61 Institute has looked at the rising rate of visa-hopping in Australia. In 2009, only 2.5 per cent of those receiving graduate visas sought another visa compared with 25 per cent in 2018. Visa-hoppers are typically employed in low-skilled jobs and earn less than other graduate visa holders. They generally come from low-income countries such as Nepal, Bangladesh and Pakistan.

Peter Dutton delivers an address to the Lowy Institute in Sydney. Picture: John Feder

There is also the point that any study of the economic impact of immigration undertaken more than 20 years ago is basically irrelevant. In those earlier years, there was essentially only a permanent migration program. The migrants made Australia their home and many didn’t have much contact with the countries they had left. Their commitment to Australia was generally very strong.

The migrant experience today is different. Most migrants enter temporarily, although many intend to seek permanent residence. Through What’sApp and the like, they have constant contact with those in the countries they left. Cheap travel means they can visit regularly. Indeed, even those who have qualified for humanitarian visas will sometimes visit the countries they have fled.

Sadly, both sides of politics have been captured by pro-immigration lobby groups – property developers, universities, big business, the bureaucracy, some ethnic groups – and show little inclination to significantly reduce migrant intakes.

There are some announcements from time to time – Labor’s plan to cap international student numbers, the Coalition’s vague intention to cut the permanent migrant intake – but nothing comes of them. Indeed, the number of international students in the country is the highest on record. Roping in tame economists is just part of the strategy.