How Immigration Saved Australia

The Australian government is looking to solve Australia’s rapid population growth by reducing immigration.

From 9news:

Scott Morrison has flagged cutting Australia’s migrant intake to ease the squeeze on our major cities, to prevent overcrowding and choking essential services.

‘In a major speech in Sydney overnight, the said he will ask the states and territories to bring population strategies to the next COAG meeting next month.

‘While Mr Morrison acknowledges the economic benefits of immigration, and as Treasurer, pushed back against reducing the intake, he concedes the public in the biggest cities are concerned about the growth.

‘”They are saying enough is enough, is enough, is enough,” Mr Morrison said…

‘”We have become, especially in Sydney and Melbourne, a victim of our success.”

The truth is that the Australian population is growing quick.

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Immigration is responsible for Australia’s population growth

Australia has an estimated 25 million inhabitants. The expectation is that it will reach 35.9 million by 2050.

As you can see in the graph below, much of recent years’ population growth has come from net overseas migration (NOM). NOM tracks the flows of people coming in and out of the country. It includes permanent and temporary visa holders like students, and also Australians who have left the country or are returning.

Graph of components of Australia's population growth

Source: Shaping a Nation Report

[Click to open in a new window]

Much of the population growth has concentrated into New South Wales, Victoria, and, to a lesser extent, Queensland.

Major cities are looking crowded…

…and, all those people are affecting infrastructure, transport, housing.

Yet all that immigration is also making Australian’s living standards better off. 

Australia’s recent growth has relied on population growth

Much of this migration is students and visitors, which bring money into the country. Education has become one of the largest exports for Australia recently.

In fact, high immigration could have helped Australia avoid a crisis for decades. It could be one of the reasons for its 27 years of economic growth track record.

As a recent report by the Treasury and Department of Home Affairs noted:

There is considerable evidence pointing to the role of migrants in sustaining or fostering strong economic growth over the longer term. The 2015 Intergenerational Report (Australian Government 2015) estimated that, over the 40 years to 2015, population factors contributed almost 18 per cent of the 1.7 per cent annual average growth in GDP per person. This was mainly due to the growth in the working age share of the population.

‘This suggests that migration helped the economy successfully weather the Global Financial Crisis and the slow global growth and poor economic conditions that followed.’

Specifically, the government is looking to cut permanent migration.

According to ABS, between the year 2000 and 2016, 2.2 million permanent migrants have come into the counrty. Almost 60% came on a skilled visa and 32% on a family visa.

Australia has a point system, which means that much of the immigration coming in is skilled, qualified labour that contributes to the economy.

Cramping down on immigration could be a mistake

The government hasn’t specified yet how much they are looking to cut permanent migration, yet the trend has been slowing on its own. So, depending on the figure, it may not be too noticeable.

Yet much of the population growth you see comes from temporary visas.

And that is also trending down.

As ABC reported:

Residents are abandoning Australia at record levels, according to new figures released by the Australian Bureau of Statistics.

‘Almost 85,000 people formally departed Australia in the final three months of 2017 — almost 9,000 more than in the same period in 2016.

‘But experts are unsure about exactly what is causing the increase…

Nick Parr, a demographer from Macquarie University, suspected the departure spike may be a reflection of growing numbers of students leaving at the end of the academic year, but it was too early to say definitively…

 ‘Professor Parr speculated there may also be other reasons for the increase.

‘“It may be that with the tightening of the criteria of employer nominations that there is less of a flow-on from previous 457 visas to permanent visas, and other temporary residents getting permanent resident visas through that route,” he said.

“‘In April last year, the number of occupations with pathways to permanent residency was slashed as part of wide-ranging immigration reforms.”’

That is, temporary visa holders could be having a harder time becoming permanent residents than before.

Cramping down on immigration could be a mistake.

Australia has seen an increase in population growth over the last decade. It may have even managed to avoid the 2008 crisis in part because of high immigration.

Much of Australia’s recent growth has relied on population growth. It has spurred investment in infrastructure, and development.

Much of that immigration is highly skilled and contributes to the economy. And it is young. The median age for both temporary and permanent visas is 26 years old.

As the large baby boomer population starts retiring, they will need a young population and good demographics to keep growing.

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Selva Freigedo,
Editor, Markets & Money

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

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