The Economics Of Immigration In Australia – FNArena.com

Australia’s Economic Growth and Migration: A Report on the Sustainable Development Goals

Introduction

Australia’s economic prowess is supported by migration, but growing the population is not a free lunch for everyone.

Key Points

• Interrupted by covid-19, migration numbers in Australia have ramped up significantly
• Skilled migration delivers a net positive fiscal impact
• Skilled young migrants earn more, work longer, spend more and pay more taxes
• Demographic pressures on Australia’s urban infrastructure a growing concern

By Preetam Kaushik

Migration by the Numbers in Australia

In FY23, net overseas migration (NOM) in Australia surged to a historic 490,000. Oxford Economics highlights the current level is 63% higher than the previous record set in FY09.

A -15% cut in annual migrant intake in 2019, followed by a pandemic-induced exodus of migrant workers and students, had left the local economy in severe shortage of skilled labour. The relaxation of pandemic restrictions, the pent-up demand since 2020, and the depreciation of the Australian Dollar have all been cited as possible contributors to the current situation.

With ABS data reporting over 432,000 unfilled job openings across 28% of all businesses in May 2023, an influx of labour may seem like a welcome development. However, the surge in NOM could exceed 800,000 in two years according to a recent estimate by Jarden.

The Fiscal Impact of Skilled Migrants on Australia

In 2021, the Treasury released a paper on the economic contributions of skilled migrants, explained under the Fiscal Impact of New Australians (FIONA) model. According to the stats from 2018-19, migrants from the Skill stream had a fiscally positive impact of $127,000 per person over the average Australian population.

These individuals account for 61% of the permanent migrant population. Partner visa holders, accounting for 22% of the migrant cohort, had a fiscal impact that is comparable to the regular population. Only parent visa holders had a lower impact and they accounted for just 4% of the cohort.

In aggregate, the FIONA model estimates the positive aggregate lifetime fiscal contribution of the 2018-19 skilled permanent migrant cohort will be $20bn more than the contribution of a similar-sized cohort of the Australian population.

The lower age of the immigrant population is the single biggest driver of fiscal impact. Skilled young migrants in the age group of 25–35 are more likely to be in higher-paying jobs for a longer period, make more purchases, and pay more taxes.

The Myths versus Reality of Temporary Migration in Australia

Apart from permanent visa holders, Australia has a workforce of nearly 2m temporary migrants. They include individuals on student visas, New Zealand citizens, and temporary skilled workers.

There has been considerable opposition towards this cohort within Australia, largely based on the perceived impact they have on local jobs. According to the Committee for Economic Development of Australia (CEDA), many of these concerns are without factual basis.

According to CEDA, temporary skilled visa holders are not a threat to local workers since they represent less than 1% of the 13.5m Australian labour force. And with a high average base salary of around $95,000 in 2018, these workers are not undercutting local employment terms.

However, as highlighted by Jarden, excess migration can put a downward pressure on wages and raise unemployment rates due to higher labour supply.

Temporary workers do not receive any free/subsidized government services, contrary to the common accusation of migrants “being on the dole.” In fact, they contribute a net positive fiscal effect through tax revenues to the local governments.

Certain industries with higher exposure to migrants enjoy a net positive impact from increased immigration. The impact could be through increase in aggregate demand (supermarkets, telecom), or a rise in labour supply (mining and healthcare services).

The Per-Capita Reality of the “Australian Miracle”

Between 1991 and 2020, Australia maintained a nearly 30-year streak of no “technical” recessions – two or more consecutive quarters of negative GDP growth. In reality, the economy has witnessed at least three recessions in that period – in 2001, 2006, and 2018.

According to the Federal Reserve Bank of St. Louis, the rapidly rising population, fuelled in part by immigration, is what kept the Australian economy in its growth mode. Even during the 2008 Global Financial Crisis, the Australian GDP growth was sustained by record levels of immigration.

In 2023, the Australian economy is on the cusp of a recession if we take into account the -0.3% fall in per capita GDP in the June Quarter of 2023. The seasonally adjusted GDP growth was at 0.4%, representing a seventh straight rise in quarterly figures since 2020.

As household consumption remains weak and consistently high-interest rates create a cooling effect on domestic demand, much of the growth in 2023 is driven by net exports, investment, and the return of students, who add an estimated $29bn to the local economy.

Sustainability Concerns versus Threat of Demographic Stagnation

The opposition towards increasing immigration levels is driven largely by concerns about sustainability. More than 80% of Australians live near the coast, in densely packed urban centres. And in the last decade, cities have been plagued by congestion, overcrowding, and rising property prices.

Housing crisis, in particular, is a major pain point in Australia. Vacancy rates are at historic lows and rent has risen by 10% in capital cities. A further increase in demand posed by an influx of 800,000 new residents will increase rental rates and increase dwelling demands by a record 300,000 in 2023 alone.

However, a drastic reduction in immigration levels may have a net negative impact on the domestic economy. An analysis of the post-Brexit UK experience throws up some interesting insights when compared to Australia and Canada.

All three are highly developed economies with high GDP, rapidly ageing populations, and falling fertility rates under 2.1 TIFR. Of the trio, Britain has reported the highest inflation rates of around 7.1% in May 2023, compared to Australia’s 5.6% and Canada’s 3.4%

SDGs, Targets, and Indicators in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth
• SDG 10: Reduced Inequalities
• SDG 11: Sustainable Cities and Communities
• SDG 17: Partnerships for the Goals

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 8.8: Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment.
• Target 10.7: Facilitate orderly, safe, regular, and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies.
• Target 11.1: By 2030, ensure access for all to adequate, safe, and affordable housing and basic services and upgrade slums.
• Target 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology, and financial resources.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator 8.8.1: Frequency rates of fatal and non-fatal occupational injuries, by sex and migrant status.
• Indicator 10.7.1: Recruitment cost borne by employee as a proportion of monthly income earned in country of destination.
• Indicator 11.1.1: Proportion of urban population living in slums, informal settlements, or inadequate housing.
• Indicator 17.16.1: Number of countries reporting progress in multi-stakeholder development effectiveness monitoring frameworks that support the achievement of the sustainable development goals.

Table: SDGs, Targets, and Indicators

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Source: fnarena.com

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