KPMG’s response to the Prime Minister’s migration announcement
Today’s announcement that Australia will open its borders to eligible visa holders (including skilled migrants) on the 1st of December is welcome news and should significantly increase Australia’s GDP going forward. During 2021 Australia has seen a net outflow of population of around 180,000 and over time, if continued, this would have a serious economic effect.
Migration has always been the lifeblood of Australia’s economic prosperity, and the door has been shut for nearly two years. KPMG’s analysis of the impact of an additional 40,000 skilled working-age migrants showed Australia’s GDP would be boosted by up to $4.7bn by the end of the decade. An extra 200,000 migrants targeted to the right areas will prove an important boost.
The loss of GDP and national income from reduced immigration is caused by two factors.
The first is fewer working-age people supporting older Australians, as migrants are typically younger. The second is the loss in productivity, since the immigration program is deliberately tilted towards skilled migrants including university students and graduates.
Overseas students, if given a clearer pathway to residency, would be a means to achieving that end. Extra incentives will be needed to make them choose Australia, as competition for international students will be intense, so we support an accelerated and targeted intake program. Today’s announcement is a positive first step in the right direction.
While there has been recent commentary about the short-term wage benefits for Australian workers by keeping migration low, it does not fully capture the total economic effects of what migration brings. While our own analysis confirms temporary workers and skilled migration does have a small negative relationship with labour cost (meaning if migration increases, wages initially fall and vice versa), it also shows that skilled migration has a positive effect on labour productivity – and labour productivity is the largest single factor driving wages outcomes.
In addition to this short-term wage impact migration is fundamentally important for Australia as it improves our dependency ratio, thereby creating sustainability in future income taxes to help pay for the goods and services all Australians need.
This is great news for many people: existing temporary visa holders who have been unable to return to Australia because of the border restrictions: those temporary visa holders in Australia wishing to visit their family and friends overseas without the threat of being unable to return; and for businesses wishing to secure entry to Australia for new employees and transferees, filling skill shortages.