The Committee for Economic Development Australia (CEDA) is the latest lobby group to call for Australia to raise its immigration intake, releasing a new report entitled Migration: The Economic Debate.
Examining CEDA’s website reveals that the report’s major sponsor is business immigration firm Fragomen Worldwide, which according to its website:
“We build bridges that transcend borders…
At Fragomen, we don’t just facilitate immigration—we create opportunities. From individuals and small local businesses to the world’s largest companies, we support all of your immigration needs, all over the world”…
Below is the CEDA report’s Executive Summary:
Australia has absorbed an estimated 10 million settlers since the First Fleet arrived in 1788. The majority of these settlers, some seven million, have come to Australia since 1945.
Post-World War II, the immigration program was focused on nation building. Over time, the “populate or perish” approach was replaced with a focus on Australia developing a predominantly skill-based formal selection system for permanent migration.
Australia now takes a disproportionately large component of the world’s migration flows, with significant economic and social consequences for the country. Despite Australia comprising only 0.3 per cent of the world’s population, 2.8 per cent of the world’s immigrants live in Australia. There are now more people living in Australia who were born overseas, as a portion of the population, than at any other time in the last 130 years. This is the highest portion in the world, after Israel.
The migration program has favoured skilled migrants over family reunion since 1997–98. Over this century there have been 1,464,622 skilled migrant visas issued with 753,691 family stream visas. Over the same period, 205,987 humanitarian visas were issued, slightly more than nine per cent of the total visas issued this century.
In line with global trends in people movement, temporary migration has become the dominate element of Australia’s immigration program. Strong demand growth means that temporary migration into Australia has eclipsed permanent flows since the mid-2000s. Australia’s temporary migration program is uncapped and allowed to fluctuate with the level of demand for individual visas.
Temporary migrants constitute four main categories: 457 visa holders, New Zealanders, working holiday makers and foreign students. The numbers entering are determined by the demand from employers for 457 workers, by international students for Australian university education and by the number of young people wanting a working holiday in Australia. The stock of temporary migrants at any point in time is 10 times greater than annual permanent entry of around 190,000 and has represented up to almost 25 per cent of the labour market in certain age cohorts at points in time.
Almost unique among developed economies, Australia’s migration program has enjoyed very strong community support and is perceived to have contributed to the economic development of the nation. According to the Organisation for Economic Co-operation and Development (OECD), this support is partially explained by the best practice nature of Australia’s immigration program.
Unfortunately, in many parts of the western world including Australia, fears of migration, and its perceived adverse consequences on local populations, are on the rise. These fears about migration, globalisation and digital disruption have spawned the emergence of political parties with skewed perceptions on the economic and social benefits of immigration, and threaten to undermine Australia’s longstanding migration program.
Additionally, key aspects of the current migration program have the potential to undermine its community acceptance and fuel these fears. An overreliance on poorly regulated market driven components of the program and the very substantial pools of relatively unregulated temporary migrants create opportunities for exploitation, as a growing number of high profile examples have proven, while also having economic consequences for some incumbent Australians.
CEDA’s research supports several of the conclusions and findings of the Productivity Commission Report No.77 Migrant Intake into Australia, released on 13 September 2016. That report noted there is scope for significant reforms within the current system that could deliver superior overall outcomes for the Australian community, particularly to:
- Recalibrate the intake of permanent skilled immigrants by shifting to a universal points test while tightening entry requirements relating to age, skills and English language proficiency; and
- Recognise that Australia’s migration policy is the nation’s de facto population policy and incorporate the economic and social consequences explicitly in future intergenerational reports.
To avoid further erosion of the bipartisan long-standing support for Australia’s immigration program, a best practice approach to the program must be maintained. This will involve rebalancing the immigration program and ensuring its integrity while also giving temporary migrants a fair go.
The report claims that annual permanent migration could be doubled over the next 40 years and deliver significant per capita economic benefit. However, this would require the migrants to be shifted away from the major cities into Northern Australia and the regions (yeah, good luck with that!). Currently, 30% of new arrivals to Australia flow to Sydney and 24% to Melbourne, and the report admits this is causing strain on services and infrastructure:
“It is questionable as to whether the current settlement patterns of migrants, predominantly into Sydney and Melbourne, can continue indefinitely with these figures… It is not possible under current planning and governance arrangements”.
Modelling in the report shows that the benefits associated with a larger population could be substantial, with the current migration program resulting in Australia’s per capita income being 5.9% higher than if there was zero net migration.
However, the report admits that there are significant costs to a bigger population that are not captured in the economic modelling:
Increasing the size of the population increases the number of people putting demands on fixed and renewable natural resources. As the supply of these resources is limited, a larger population can contribute to lower productivity and income per capita. Road congestion is a major concern to many Australians, particularly in the nation’s most congested cities of Sydney, Melbourne and Brisbane. Population growth in urban areas adds to congestion and can reduce the amenity of these cities. The costs of congestion, such as additional time spent travelling, uncertainty about travel times, accidents, and frustrations are real even if they are not measured in economic statistics of the nation’s overall wellbeing.
Likewise, urban utilities, such as water supplies, utilise the environment as a source of water (rain fed dams and groundwater), and waste disposal (ocean outfalls and landfills). As the population grows, the pressure on the environment means that more infrastructure is required to deliver the same level of services. This is particularly the case with reliable urban water supplies where Australia already has some of the largest reservoirs to population in the world. As annual demand approaches mean annual inflows, a much larger proportion of water requires engineering solutions. The costs of additional water are shared between incumbents and immigrants.
CEDA’s findings are basically the same as those presented in the Productivity Commission’s (PC) final Migrant Intake into Australia report, released in September (analysed here). In this report, the PC estimated that per capita GDP would be increased under current migration settings versus a zero NOM baseline. However, the PC also found that labour productivity would decrease as would real wages:
Compared to the business-as-usual case, labour productivity is projected to be higher under the hypothetical zero NOM case — by around 2 per cent by 2060 (figure 10.5, panel b). The higher labour productivity is reflected in higher real wage receipts by the workforce in the zero NOM case.
The PC’s major study on the Economic Impacts of Migration and Population Growth, released in 2006, also found that all of the gains from increased skilled migration flow to the migrants themselves and the owners of capital, whereas “the incomes of existing resident workers grow more slowly than would otherwise be the case”.
Moreover, the PC found that all of the economic benefits from immigration come from lowering the average age profile of the population and increasing the share of workers in the economy. However, these benefits are only transitory: as the migrants themselves grow old they will drag on growth after the forecast period, thus requiring ever more immigrants and a bigger population to offset population ageing (classic ‘ponzi demography’). To quote the PC:
“The continuation of an immigration system oriented towards younger working-age people can boost the proportion of the population in the workforce and, thereby, provide a ‘demographic dividend’ to the Australian economy. However, this demographic dividend comes with a larger population and over time permanent immigrants will themselves age and add to the proportion of the population aged over 65 years”.
Finally, the CEDA report presents 17 recommendations to better target the immigration system. These range from:
- Influencing Australia’s settlement pattern, with particular beneficial impacts of migration in regions and Northern Australia;
- Consideration of the impact of the current migration program on Melbourne and Sydney and subsequent future infrastructure and services requirements;
- Providing a more robust model for determining occupation shortages with respect of 457 visas;
- Shifting to a universal points test for permanent skilled migrants and tightening entry requirements relating to age, skills and English-language proficiency;
- Reviewing and capping the working holiday visa program and possibly introducing a purpose built guest worker program for specific industries struggling to attract adequate low-skilled workers;
- Increasing penalties for exploiting migrant workers; and
- Improving settlement services and support, access to English language programs and recognition of foreign qualifications.
It is important to note that CEDA markets itself as “a respected independent national organisation with an engaged cross-sector membership. For more than 50 years, CEDA has been delivering leading thinking, informed discourse and rigorous research on the issues that matter… CEDA is not restricted by vested interests or political persuasion… CEDA focuses on driving debate and critical analysis of the most important topics of the day”.
I offered to present to CEDA the opposing view that maintaining such high levels of immigration is not in Australia’s interest. However, I was knocked back, presumably because my views do not align with the growth lobby’s agenda.
