Intergenerational Report: Treasury argues ‘Big Australia’ migration surge made nation richer
A strategic migration policy that properly plans for infrastructure and social services can ease the burden of an ageing society on younger Australians
Over the next 40 years, the pace of overseas migration will slide from its pre-pandemic “Big Australia” era says Treasury, which argues the population boom made the economy larger, kept the population younger, boosted workforce participation, raised productivity growth, and will pay a handsome fiscal dividend.
“Strategically managed population growth and migration can support Australia by offsetting population ageing, improving economic outcomes like productivity and living standards, supporting stronger fiscal outcomes, and enriching the social fabric of our communities,” it said in the Intergenerational Report.
That’s the customary Treasury line – migration grows the economy – and one endorsed by the business lobbies, which mostly represent companies that benefit from a larger consumer market,
Yet it’s a view that is pushing against the spirit of the age, as a surge of foreign students and workers slams into the post-Covid reality of higher living costs, housing stress and stagnant incomes.
Anthony Albanese and Jim Chalmers sense a community backlash is brewing on several fronts and are emphasising that there are artificial forces driving the net inflow of 715,000 migrants in the 24 months to June next year.
In any case, the IGR shows the catch-up to the pre-pandemic trend in the number of settlers, when the Coalition was in charge, won’t occur until decade’s end, with the population in 2063 on track to surpass 40 million.
The IGR’s authors have provided fresh evidence to make the case for “well-planned” migration, with an emphasis on boosting productivity, today’s weakest link in the fabled 3Ps that drive economic growth (along with population and participation).
New OECD research found that between 2011 and 2018, a 10 per cent increase in the share of the overseas-born population in an area increased the labour productivity of Australian-born workers in that area by 1.3 per cent
The forthcoming study, The Impact of Migration on Local Productivity in Australia, also found a one percentage point annual increase in the migrant inflow to an area relative to its population increased Australian-born employment in that area by 0.53 per cent.
Curiously, the IGR’s projections for high and low migration rates do not assume a productivity bonus from migrant workers.
Treasury has highlighted the fiscal dividend from permanent migration for an indebted, budget-constrained and ageing society,
In May, the Albanese government announced that the planning level for the 2023-24 permanent migration program would be 190,000 places, with a 72:28 split between skilled and family visas, down from 195,000 places the previous year to ease labour shortages.
Treasury’s FIONA model of the lifetime fiscal impact on the federal budget per permanent migrant shows those who arrive younger and are highly skilled, such as those in Employer Sponsored and Skilled Independent visas, generally make a higher fiscal contribution during their time in Australia, compared with those migrants who arrive later in life or are lower skilled.
Those new estimates don’t take into account all spending (such as defence) and revenue (company tax) or impact on state and local budgets, a large caveat to be sure.
The population of 26 million in the middle of last year was almost three million or 12 per cent higher than Treasury thought it would be when Peter Costello put out the first long-range fiscal document in 2002, because of a doubling in what was expected in migration.
Treasury notes our 1.4 per cent annual population growth over two decades led the rich world – outpacing Canada (1 per cent), the US (0.8 per cent) and France and UK (0.6 per cent) – but will fall to 1.1 per cent over the next 40 years.
Net overseas migration is expected to account for 0.7 percentage points of Australia’s average annual population growth, based on the assumption of a steady inflow of 235,000 migrants over the long term.
As Treasury notes and experience shows, that forecast is subject to changes in government policy and the economic cycle.
The average growth rate in migration over the next 40 years is the same average rate that was seen over the past 40 years, although higher than the contribution in the 1990s (0.4 percentage points) and lower than in the 2010s (0.9 percentage points).
Rich countries, especially Canada and Britain, are having a post-pandemic surge of foreigners, the first from a targeted migration campaign, the second from an influx of Ukrainian refugees.
There will be increasing competition for the world’s talent.
This raises the stakes for the imminent migration strategy shaped by Home Affairs Minister Clare O’Neil and Treasury’s employment white paper.
The key to community support for migration is the gold-standard of “well planned” and that’s been missing. It means the housing, energy, health, education, social services and transport networks are in place to cope with more people, and authorities are in control of overseas arrivals, rather than the self-selecting temporary visa holders who have caught governments of both political stripes on the hop.
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