Migrants to power economy in MYEFO update

Permanent migration to be steadily increased to 160,000 per year to energise economic growth and address skills shortages.

International arrivals at Sydney airport. The Morrison government wants to steadily increase permanent ­migration back to about 160,000 a year. Picture: Gaye Gerard

The Morrison government will steadily increase permanent ­migration back to about 160,000 a year to energise economic growth and address skills shortages, with the mid-year budget update to ­estimate net overseas migration to be 120,000 higher than expected over the next two years.

The Mid-Year Economic and Fiscal Outlookwill show that the most enduring economic impact of Covid-19 is a smaller overall population, with 1.5 million fewer people after 10 years than forecast before the pandemic.

Despite net overseas migration shrinking by 100,000 people in 2020-21, and population growth falling to its lowest rate in a century at just 0.1 per cent, a return to net positive overseas migration and higher population growth will boost consumption growth and strengthen economic recovery.

Treasurer Josh Frydenberg said the population intake would be carefully managed but it was an essential part of the economic ­recovery from the pandemic.

“With vaccination rates amongst the highest in the world, our international borders are opening around six months earlier than anticipated at budget, leading to a sharp turnaround in ­migration flows,” he told The Weekend Australian.

“The MYEFO will show that we expect 120,000 additional ­migrants over the next two years than expected at budget, which will support stronger economic activity providing a welcome boost to our economic recovery.”

The May budget forecast net overseas migration to be minus 77,000 in 2021-22 but this has been revised to minus 41,000. The budget forecast net overseas ­migration to be 96,000 in 2022-23 but this will be upgraded to 180,000. The government is opening international borders six months earlier than anticipated.

The Treasurer noted that the increase in permanent migration includes about 200,000 places for students, tourists and skilled workers to return to Australia to address skills shortages previously announced.

“We have been very successful in managing our population in that we’ve been welcoming to ­refugees, focused on the needs of family reunion and skilled ­labour,” Mr Frydenberg said. “One of the great strengths of Australia is its multiculturalism, its diversity, and that has been provided by immigration.”

Mr Frydenberg said the economic recovery from the pandemic had been much stronger than Treasury predicted and next Thursday’s budget update would provide an upbeat outlook for ­employment, growth, investment and productivity.

The government has started work on the 2022-23 budget to be delivered on March 29, which will focus on the continued economic rebound and repairing the balance sheet.

“Next year’s budget is about locking in the recovery and building for the future,” the Treasurer said. “We are very much focused on fiscal discipline and we did what we had to do during the height of the pandemic, but now we’ve wound down those emergency support payments and we want to get the fiscal policy back to normal settings.”

Mr Frydenberg confirmed the government’s fiscal strategy will continue to be focused on driving unemployment down to a sustainable level below 5 per cent to meet the government’s full ­employment goal.

“Creating jobs is more than an economic objective, it’s a societal one because there is dignity in work,” he said.

“The single biggest economic achievement over the last two years is the rebound we have seen in the labour market, avoiding the long-term unemployment that was characteristic of the ­recessions in the 1980s and 90s.”  Mr Frydenberg said the next election would be a contest ­between the Coalition and Labor about who can be trusted to steer the economy through challenging times and secure the recovery.

“With a stronger economy you can fund the service delivery that so many people rely on, whether it’s health, education, childcare, disability support, all of which are critically important but can only be achieved if we’ve got a strong economy,” he said.

“A strong economy is central to everything.”