Before the COVID-19 crisis, two-thirds of Australia’s economic growth in recent years had come from population growth. And two-thirds of population growth had come from a strong immigration intake. Next financial year our immigration intake is expected to dip by 85 per cent https://www.afr.com/policy/economy/later-migration-plunge-to-hurt-economy-and-housing-20200501-p54p2g Already in recession, Australia could easily drop back into recession after positive September quarter growth, owing to a snap withdrawal of fiscal support at the end of that quarter and a collapse in immigration, creating a W-shaped economic trajectory https://www.afr.com/policy/economy/time-to-worry-about-a-w-shaped-economic-slump-20200518-p54tv0 As the government grapples with economic policies for the recovery phase it will also need to revamp its immigration policy.
A new report by the McKell Institute provides some useful guidance. Prepared by former deputy secretary in the immigration department, Abul Rizvi, the report argues the contribution of all migrants within Australia is to be celebrated. It strongly supports Australia’s permanent immigration program and points out that it could not be delivered at current levels without a substantial feeder cohort of temporary entrants.
There is no compelling evidence that permanent immigration reduces wages. On the contrary, by contributing to Australia’s skills base, it probably increases wage rates overall.
Another benefit of permanent immigration is that, by bringing younger people to Australia, it freshens up the profile of an otherwise ageing population. When the first intergenerational report was released in the early 2000s, it warned of an ageing population, with a shrinking working-age population being called upon to do the work and pay taxes to support those too old to work. This led to Treasurer Peter Costello’s since-repealed Baby Bonus, to encourage couples to have more babies and earlier.
While fertility has risen, permanent immigration has played a larger role since the early-2000s than was envisaged at the time, the McKell report explaining that it has led to Australia emerging as one of the youngest, most culturally diverse and fastest-growing developed countries in the world. Indeed, on current projections, the report suggests Australia may be the last developed nation to begin experiencing population decline.
These are high accolades, yet the permanent immigration program has been cut back recently in favour of temporary migration featuring large numbers of highly vulnerable workers. The report warns that if the labour rights of temporary entrants into Australia remain unenforced, labour exploitation will remain rife, placing downward pressure on wages and conditions in lower-skilled industries already prone to underpayment of wages.
This is the essential question: is the temporary immigration program primarily a pathway to permanent residency and ultimately citizenship, or is it a mechanism for wage suppression?
Rather than treating temporary migrants as a tap to be turned on and off, the Government should ensure clear pathways to permanent residence for temporary entrants who meet Australia’s needs. Telling temporary migrants to go home when the pandemic struck Australia is not the sort of treatment they deserve after being invited here. Nor is it the Australian way to leave in poverty those who cannot afford to go home for lack of earnings here during the pandemic.
Despite the bellicose rhetoric coming from the Chinese government that Australians are racist towards Chinese students, those students are aware that studying here is a promising pathway to permanent residency. Students in Hong Kong might find studying in Australia increasingly attractive.
Labor MP Julian Hill has proposed that addressing the backlog of 100,000 in applicants for partner visas could be an effective way of rapidly increasing the permanent immigration intake.
If reviving Australia’s economy after the COVID-19 restrictions are lifted isn’t challenging enough, overcoming the second hit to GDP from a collapse in our immigration program will be daunting.
We need an economic reform program designed to lift national productivity and an immigration program that contributes to national prosperity not to wage suppression. That requires placing greater weight on permanent immigration, fed by cohorts of temporary visa holders, and less reliance on the ebb and flow of temporary migrants who the Government never really intends will make Australia their permanent home. Australia’s first recession in 29 years doesn’t look good on any treasurer’s resume, but two recessions in two years would look horrendous.
Craig Emerson is chair of the McKell Institute, a Distinguished Fellow at the ANU, Adjunct Professor at Victoria University’s College of Business and Director of RMIT’s APEC Study Centre.