Migration a net boost to economy, study finds

Migration is forecast to add up to one percentage point to GDP growth each year for 30 years.

Skilled migrant Clare Veness near her home in Sydney's inner-city Waterloo yesterday. Picture: Britta Campion

Migration is making Australians wealthier, with the annual ­permanent ­intake forecast to add up to one percentage point to GDP growth each year for 30 years, while making a combined lifetime tax contribution of almost $7 billion.

Amid a heated debate within government ranks over whether to cut immigration levels, a landmark report released by Treasury and the Department of Home Affairs makes the case for a big Australia and smashes the twin myths that migrants were either taking jobs from Australians or had become a welfare burden.

The study’s release follows ­revelations in The Australian last week showing that the annual permanent migrant intake this year was forecast to drop by more than 20,000 — from a ceiling of 190,000 — to levels similar to those at the end of the Howard government. The drop was largely due to tighter vetting rules introduced in 2015 by the Immigration Department.

Tracing the history of migration and population growth over 50 years, the report found that skilled migrants were delivering an economic dividend, lifting the standard of living by 0.1 per cent of GDP per capita, ­increasing productivity by 10 per cent and raising the workforce participation rate. The migrant contribution had helped cushion Australia against the full impact of the global financial crisis.

The report also came with a warning likely to be seized on by critics. It claims that while the economic benefits of migration are well documented, a solution will need to be found to prevent existing pressures on infrastructure, housing, congestion and the environment intensifying.

 

The report, initiated last year as part of an internal study by Home ­Affairs secretary Mike ­Pezzullo and Treasury secretary John Fraser, found the current migration program would add between 0.5 and 1 percentage point to annual average GDP growth between 2020 and 2050, by limiting the economic impact of the ageing population. It found that the wages, hours and employment rate of non-migrant Australians had not been harmed by immigration while improving the budget bottom line.

Skilled migrants granted permanent visas in 2014-15 were ­estimated to have a lifetime net contribution of $6.9bn to the ­budget, while family migrants granted permanent visas that year were estimated to have a $1.6bn contribution. Only refugee and humanitarian migrants were estimated to have a lifetime net cost to the budget, of $2.7bn.

“Migrants deliver an economic dividend for Australia due to current policy settings which favour migrants of working age who have skills to contribute to the economy,” the report said.

“This leads to higher rates of workforce participation and likely productivity benefits. This, in turn, increases Australia’s GDP and GDP per person, with positive flow-on effects for living standards … migration improves the commonwealth’s fiscal position, since migrants are likely to contribute more to tax revenue than they claim in social services or other government support.

“Together, the 2014-15 cohorts of the Permanent Migration ­Program, the Humanitarian Program and the 457 temporary skilled visa program are projected to contribute a net fiscal benefit of $9.7bn over 50 years.”

 

Clare Veness grew up in Scotland and spent time in the US and Singapore, but her roots in Australia are digging deep. The 30-year-old migrated to Sydney three years ago on a working-holiday visa, but it was soon clear to her she wouldn’t be leaving. “I’m going to be here for good,” she said. “I’ve got no plans to go back.”

She works in recruitment, and secured her permanent residency after being sponsored as a skilled migrant by her employer.

Skilled migrants, she said, were clearly still an important part of the Australian economy. “We’re filling the gaps,” she said. “Sydney’s full of expats”.

The report revealed that temporary migration for education and tourism, rather than the permanent program, had been driving population growth in recent times. Nevertheless, migration had accounted for 54 per cent of population growth over the past two decades. However, it remained lower than in the 1960s and 70s.

The call for lower annual immigration rates was resurrected by Tony Abbott. In a controversial speech earlier this year, the former prime minister said a lack of infrastructure and concerns over social cohesion required the annual intake to be cut by 80,000 to 110,000.

The issue came to a head last week when The Australian revealed there had been discussions last year among cabinet ministers over whether to reduce the annual intake by 20,000. While supported by several Liberal MPs, the push for mandating lower intakes has been dismissed by cabinet ministers including Scott Morrison, who said that the answer was to build more infrastructure rather than reduce migration.

 

“The analysis conducted by Treasury and the Department of Home Affairs provides a clear evidence base for the government’s migration policy settings supporting our national interest,” the Treasurer said last night

“The Turnbull government’s migration program retains the flexibility of a maximum cap on permanent migration, focused on skills, and is underpinned by our strong and successful border controls and strict enforcement of our visa rules to maintain integrity.

“The key difference between the Turnbull government and its Labor predecessors is that the Labor government ran a tick-and-flick program on permanent migration. Under previous governments, the 190,000 intake under the permanent program for skills and family visas was a target that had to be met. In the 2016-17 budget, the Turnbull government officially changed this requirement to be a maximum cap under the program, creating the necessary flexibility.”

Mr Morrison said the report, as well as confirming the economic value of the migration program, reinforced the government’s decision to focus on planning and managing the impacts of growth, “especially through our record investment in public infrastructure”.

“This will continue to be a focus in this year’s budget,” he said.

The report supported concerns raised by critics of current intake levels in the permanent migration program. “High rates of population growth can heighten existing pressures on infrastructure, housing, and the environment,” the report said.

“Without continuing action to find innovative solutions, high rates of growth may also intensify issues such as congestion and excessive waste production. To fully reap the benefits of immigration and population growth, Australia must continue to explore and address these issues.”

Additional reporting: Sam Buckingham-Jones