Albanese government’s critical surgery to fix broken migration system

If Labor can get the policy right, revamping the points test for permanent migration will pay immense dividends.

Net overseas migration in 2023 rose by 26 per cent to hit a record 547,300 for a calendar year.

Australia’s population increased by 651,200 people last year, driven by foreign students and temporary workers. Even the greediest Treasury official or major retailer would admit an influx of 550,000 migrants is unsustainable. Anthony Albanese insists this unprecedented surge, putting immense strain on housing and social ser­vices, is an aberration; the last time migration added the equivalent burst to our population was more than 100 years ago as Diggers returned from the Great War.

With its new migration strategy, launched last December, Labor is trying to execute several policy pivots; from a record inflow to more “normal” levels across the rest of the decade; fewer temporary visa holders and proportionately more permanent settlers; fewer low-wage, less-educated workers and more highly skilled ones. All the while the government is trying to restore the integrity of a failing and incredibly complex system that is serially exploited by criminals and gamed by those who know their way around its gaps and perversities.

Often lost in the outsized numbers and political argy-bargy ahead of an election is the nation-building tool of the permanent migration program, which pays dividends when policymakers get it right. We once operated on a “populate or perish” mantra but since the 1990s our policy bias has shifted to skilled migration.

Among a number of systemic flaws identified by last year’s migration review by Martin Parkinson, Joanna Howe and John Azarias, the so-called points test stands out. It largely determines who comes here permanently and who will become future citizens. This diagnostic tool, used since 1979, allocates a maximum of 145 points to potential migrants depending on their age, proficiency in English, education and work experience, and then ranks them.

Critics point to bizarre outcomes. For instance, an applicant with a PhD from Oxford or Harvard receives 20 points on educational qualifications, the same as a person with a bachelor’s degree from an Australian regional university. An applicant aged 39 receives 25 points while a 40-year-old gets 15 points (even though the economic potential of the two is virtually the same; Canada uses a sliding scale test).

Although there have been tweaks, the last major change to the test was in 2012. The review found “the current test is not sufficiently calibrated to effectively distinguish between candidates”.

For instance, because of insufficient differentiation, many applicants score the maximum available points on the core criteria (skills, age and English proficiency), leaving criteria of less obvious benefit (such as regional study and community language skills) to be the primary determinants of individual rankings.

Tellingly, as many points for these additional criteria are available only in Australia, the review found the test “contributes to a growing group of ‘permanently temporary’ migrants”. As the review found, not all temporary visa holders will be successful but they’ll stick around for years trying to accrue extra points.

“It is incumbent upon the government to provide more clarity to migrants about their prospects of becoming permanent residents,” the review said. “These additional criteria also add to the complexity of the points test, while sending confusing signals to migrants about what they should do to increase their chances of receiving a permanent visa.”

There’s gaming of the visa system as well. Review panel member Howe, a law professor at the University of Adelaide, sketched out a scenario for Inquirer about an international student who completed a bachelor degree in IT and a professional year program with the Australian Computer Society in Queensland to get a positive skills assessment.

The person could move to Adelaide as the holder of a subclass 485 graduate visa, move to Whyalla in outer regional South Australia, live and work (in any occupation, such as a pizza delivery driver) for six months, before meeting the SA government eligibility criteria and being nominated by it for a subclass 491 visa.

Once nominated for a 491 visa, the applicant could return to Queensland and move to another regionally defined area. “This example exposes how it’s possible to manipulate the points system through gaining points quickly and easily but ultimately resulting in a permanent migrant with less benefit to Australia and unlikely to boost productivity,” Howe told Inquirer, just after the government migration strategy was launched six months ago.

Almost two-thirds of permanent skilled migrants are selected through the points test, which applies to the Skilled Independent (subclass 189), Skilled (state) Nominated (subclass 190) and Regional Skilled Work Provisional visa (subclass 491). The other third of places in the skilled visa stream are Employer-nominated or Global Talent (both of these visas require various thresholds to be met). Unpacking the numbers for last financial year’s migration program of 195,004 places shows almost 63 per cent of those granted permanency were already here on temporary visas.

There were 142,344 skilled stream migrants, with the main countries of origin India (25.5 per cent), China (9.5 per cent) and Nepal (7.9 per cent).

The skilled stream includes not just the primary applicant (who satisfies the primary criteria for the grant of a visa) but also their accompanying family unit (secondary applicants), such as spouses and children. Boiling it down, fewer than half of those granted a permanent skilled visa were primary applicants. So out of 195,004 migrants who got a permanent place in 2022-23, only 68,900 were primary skilled applicants.

Home Affairs Minister Clare O’Neil is determined to put permanent migration at the centre of policy. She has declared no one understands the points test and last December vowed to fix it this year. What is surprising is how slow progress has been. O’Neil released a discussion paper on the issue in April; submissions on this phase closed three weeks ago.

Home Affairs Minister Clare O’Neilis determined to put permanent migration at the centre of policy. Picture: NCA NewsWire/Martin Ollman

The Committee for Economic Development of Australia argues English language proficiency and education should have more weighting in the test, citing research showing these attributes deliver superior labour market and earnings outcomes. As well, the member-based think tank says points should not be awarded for nomination by the states or territories because government-sponsored skilled migrants earn 16 per cent less than Australian-born workers; employer-sponsored and skilled independent migrants earn more.

In its submission, CEDA says the number of points awarded for work experience should be limited, reflecting the low capacity of government to accurately assess the quality of work experience, and diminishing returns to experience in some fields. It also supports a policy shift to include more employer involvement.

“Selection by an employer provides an endorsement of an applicant, their capabilities, skills and experience that goes beyond just the capacity to meet current skill needs,” the CEDA submission says. “In the longer term there would be value in exploring models where employers have a greater role in selecting migrants who satisfy a skill threshold.”

CEDA says nearly a quarter of skilled migrants work in a job below their skill level. As well, both male and female secondary applicants earned significantly less than primary applicants. CEDA argues this largely can be explained by this group being younger, less educated, working in lower-paying industries and having poorer English, on average. These large earnings disadvantages persist over time.

“Giving greater weight in the points system to the skills – including English language ability – of secondary applicants would shift the balance towards selecting skilled independent migrants who have skilled partners, with consequently better labour market outcomes,” CEDA argues.

“Given the low contribution currently, there would need to be a substantial increase in the weight of a partner’s skills in order to make this effective. There is international precedent, as Canada and New Zealand allocate a higher proportion of points for the language skills, experience and education of a skilled primary applicant’s partner.”

The Grattan Institute estimates Australia will offer around 800,000 points-tested visas across the next decade. In a new report this month, It All Adds Up, the institute’s Brendan Coates, Trent Wiltshire and Natasha Bradshaw argue more points should be offered to highly educated applicants and those with strong English language skills.

“Migrants trained in any high-skilled occupation should be eligible to apply, and points should be offered for any skilled employment experience and particularly for high-paying Australian work experience,” they write. “Australia should no longer offer points for studying in Australia or in a regional area, or for undertaking a professional year. The minimum number of points required to be eligible for a points-tested visa should rise, and applicants who accrue a very high number of points should be guaranteed an invitation to apply for a visa.”

As well, the authors argue, “state and regional points-tested visa programs should be abolished, and more skilled independent visas offered in their stead”, thus helping the nation select more highly skilled migrants, and giving those migrants “the best chance to thrive in Australia”.

The authors say these changes still would allow governments to staff essential health and education services, including in regional areas, since the test would better reward those applicants’ qualifications and work experience. Grattan’s modelling shows that reforming the points test along these lines would provide an $84bn boost to Australian government budgets across the next 30 years. Replacing state and regional points-tested visas with a single points-tested visa program would provide a further $87bn boost to government budgets.

Coates claims Peter Dutton’s proposal to cut the permanent skilled migration by 25 per cent would mean Australians having to pay higher taxes or get fewer services. Across a decade it would lead to only a small reduction in rents. Grattan’s economic policy program director argues skilled migrants lift the productivity of local workers and boost government budgets, raising Australians’ incomes.

“Cutting migration, and especially permanent skilled migration, may make our housing a bit cheaper,” says Coates. “But it would definitely make us poorer.”