Coronavirus: huge hit as migration is slashed

Overseas net migration is forecast to fall by about 85 per cent to about 36,000 people in 2020-21, a $50bn hit to national income.

‘There will be lag effects,­ and that’s why I’ve flagged before them that we need growth-orient­ated policies to overcome what will be quite stiff headwind’: Scott Morrison. Picture: Getty Images

Scott Morrison has revealed that overseas net migration is forecast to fall by about 85 per cent to just 36,000 people in 2020-21 as a result­ of tough COVID-19 border restrictions, with the decline thought to represent about a $50bn hit to national income.

The Prime Minister said he would seek to combat the economic blow by setting out a plan to help turbocharge the recovery and help people return to work as the country emerges from the shadow of the pandemic.

Speaking after the national cabinet meeting on Friday, Mr Morrison said the government was expecting “just over a 30 per cent fall” for net overseas migra­tion in 2019-20 when compared with the previous year.

Mr Morrison said that in 2020-21 there would be an “85 per cent fall off those 2018-19 levels as well — so they are quite significant falls”.

“You’ll be well aware from past budgets of the importance of those numbers and how they contribute to overall gross domestic product and its growth each year. That is a significant change,” he said.

“There will be lag effects,­ and that’s why I’ve flagged before them that we need growth-orient­ated policies to overcome what will be quite stiff headwinds.”

Australia received a net gain from overseas migration of 239,600 people in the 12 months to June 30, 2019, according to data from the Australian Bureau of Statistics. The forecast 85 per cent reduction will slash that number to just 35,940 people in 2020-21.

Chris Richardson, a partner at Deloitte Access Economics, told The Weekend Australian a reduction of that size would contribute about a quarter, or 2.5 per cent, towards the estimated 10 per cent hit to national income arising as a result of the COVID-19 crisis.

“Australia will see a shortfall in national income of about $200bn this year from the two trillion we would otherwise have expected to see,” Mr Richardson said.

“And about $50bn of that flows from the people who aren’t here — that is the migrants and the foreign students.

“We take this nation’s high population growth for granted. It’s been there forever. It’s just part of the background. But our population growth has just disappeared and it won’t return to normal until the world does too.

“It’s not just a hit to the economy. It’s a hit to bits of the economy. It’s also a considerable hit to the budget. How much remains to be determined.”

Mr Richardson said migrants were important to the budget ­because the federal government usually subsidised people when they were young through education and healthcare, and when they were old through healthcare and aged care and pensions.

“When you get a migrant — and on average Australia gets young adult skilled migrants — we are getting people we haven’t had to pay for (through) that ­investment phase. In budgetary terms, for the government, migra­nts are a clear plus,” he said. “I am comfortable they are a clear plus for the economy too. It makes sense for us to get young educated migrants from the rest of the world.”

Mr Morrison also sketched out the other economic consequences of the lockdown, noting that there were more than 1.5 million Aus­tralians on JobSeeker payments, with 900,000 claims processed in the past six weeks. “This bears out the Treasury estimate that suggests the unemployment rate will rise to 10 per cent, and potentially beyond.”

More than 650,000 businesses have also registered to access the $1500 fortnightly JobKeeper payment, while more than 950,000 applications have been made to allow early access to super, totalling nearly $8bn in claims.

As first revealed by The Australian on Friday, more than 340,000 businesses have received a cashflow boost under the government’s cashflow program, worth over $6bn, while 6.8 million Australians have received one-off $750 payments totalling $5.1bn.

Mr Richardson warned that the economic hit arising from the fall in migration would not be swiftly rectified.