Once the ABS publishes its final estimate of net overseas migration to Australia for the year 2008-09, it will be about 340,000. This is a massive number by historical standards but it is not comparable with history because, in 2006, the ABS changed its definition of a migrant.
Since 2006, people who enter Australia on a long-term temporary basis have been counted as migrants. Before 2006, the vast majority were not counted as migrants. And, in the years since the definition was changed, temporary entry to Australia has increased dramatically. In 2009, there were 1,440,000 people living in Australia on a long-term temporary basis. Five years earlier this number was 790,000. About 580,000 temporaries are current overseas students or former overseas students permitted to remain in Australia temporarily for another 18 months. A further 550,000 are New Zealand citizens.
The temporary population of Australia cannot continue to increase by 130,000 per annum. Indeed, the overseas student population is much more likely to fall in the next five years than to rise. Australian universities will face massive competition in the immediate future from UK and US universities desperate for cash and the relative shift in currency values will make Australia much less competitive. In the VET sector, the rorts are being cleaned up and the migration rules have been changed for entry and for conversion to permanent residence.
If we discount the temporary effect of overseas students, net migration would fall to about 180,000, the long-term level assumed in the projections made by the Treasury and by the ABS. Some of the 180,000 would be temporary especially 457 long-stay business visas holders and New Zealanders. With fertility constant at about 1.9 births per woman and net migration at 180,000 per annum, Australia’s population would rise by 2050 to the 35 million that has been the subject of much discussion.
Policy setting to slow the pace of ageing is not the driving force of immigration. The driving force is the demand for labour. Migration fell close to zero in the mid 1970s and the mid 1990s because there was little demand for labour. Now, the demand for labour is extremely high and the likelihood is that it will remain high for at least two decades.
Without immigration, Australia’s labour force would not grow at all in the next 40 years and the supply of labour will fall a long way short of demand. The scope to increase the labour force participation of the existing population is small and any increase we were able to achieve would not produce the range of skills required. The high demand for labour cannot simply be switched off.
Australia is already locked into a large number of new contracts to supply resources to countries in the northern hemisphere. The infrastructure for these projects has to be built and the mines operated. The wealth, taxation and royalties ensuing from these projects will spread across the economy generating demand for labour across the board. And there are numerous new projects awaiting the go-ahead. Financing seems not to be a problem and governments do not seem to be eager to stop these projects going ahead.
Stop migration now and there is a severe risk of a spiral of wage inflation and interest rate rises.
Stop the development projects now and we cut the living standards of tomorrow’s Australians. Stop the wealth creation and we do not have the capital to undertake the major investment in infrastructure that we need even if we had no additional population.
Is it realistic to believe that the resources boom can be ended tomorrow and that there will be no more population growth driven by labour demand? No, it is not realistic and if we do not plan for the inevitable population growth, the pressures from population that some people are feeling now will become a whole lot worse in the future.
I think this article is on the money, however I still believe we will see wages take off like a rocket over the next five years, with the retirement of the boomers and workplaces needing to attract and retain skilled staff.
Too much logic and common sense for some I fear, and therefore would be a perfectly sound reason for Tony Abbott to want to cut immigration, since he appears to have a totally anti-market, anti-rational approach to everything else!
Ironic really that he is a sworn enemy of Pauline Hanson yet his populist style is not that different!
Dear Peter,
I have absolutely no doubt what you say is correct,i.e. we are in a dammed if we do, dammed if we don’t bind. Can you please tell me though, if we need to keep increasing population now in order to maintain living standards, will this always be the case? You can see the simple point I’m getting at I hope.
This piece manufactures a dilemma by being too simplistic. It ignores structural adjustment of the economy and therefore the workforce, rejects too quickly increasing labour force participation (for example, by women and by men over 50 whose participation rate is relatively low) and simply asserts that Australia can’t slow or even stop building new mines.
Stopping development projects now does not ‘cut the living standards of tomorrow’s Australians’ but maintains them at current levels on the piece’s simplistic assumptions. But as the Gulf states showed everyone, slowing or stopping increases in production does not necessarily slow increases in export revenue since the resource shortage may cause further price increases.
It amuses me when population wonks and economists persist in writing of the supposed downside of a stable Australian population.
If supposed experts cannot perceive that there is a glut of humankind on the face of the earth already and develop models which recognise that resources are finte and place a value on such things as security of water, food and good air and a stable climate, then they are playing fiddles which are missing at least 3 strings.
We have just seen one simplistic perception of a far more complex issue. Stephen and Gavin are closer to reality.