Migration continues to reshape Australia

| May 1, 2018

Population growth and distribution affect most areas of public policy and a new Treasury paper examines the benefits that migrations bring to Australia, while accepting the challenges such growth can bring.

Modern Australia is a product of immigration and while population growth has increased in recent times, it still remains lower than in the 1960s and 1970s. While births have been the main driver of population growth over the last century, there have been times when net overseas migration has contributed a larger share, including over the most recent decade or so.

The story of Australia’s population over the last century is one shaped by baby booms and successive waves of migration. Australia’s population is now almost 25 million, having increased by almost five times over the last century.

Over the last 50 years, Australia’s population growth rate has remained fairly constant, although it is much higher than most OECD countries.  Canada and New Zealand – countries often considered similar to Australia – have also experienced high population growth rates, but they have not grown as quickly as Australia.

In 2016, Australia had the sixth highest population growth rate in the OECD, the same ranking as in the 1960s. Population growth rates have slowed across many OECD countries, but Australia’s population growth rate was higher in 2016 than it was at its low point during the 1990s, despite remaining lower than during the 1960s and 1970s.

Australia’s population growth has varied widely across the States and sub‑state regions. In general, however, Australia’s cities have grown strongly while population growth in regional areas has been more mixed. Over the last decade, migration has contributed particularly strongly to population growth in Sydney, Perth and Melbourne.

While migrants from the United Kingdom featured strongly in Australia’s early migration efforts and remain the largest group of overseas‑born residents, migrants from China, India and other Asian countries are dominating recent change. According to the 2016 Census, a greater proportion of people born overseas are now from Asia rather than from Europe for the first time in recent history. However, more of Australia’s residents still have European ancestry overall.

Australia’s migrants increasingly tend to enter the country on temporary visas before transitioning to permanent residency. Permanent migrants are also increasingly coming through skilled pathways, including employer sponsored visas.

Australia currently has two distinct programs for permanent migrants — a Permanent Migration Program that includes a skill stream and a family stream, and the Refugee and Humanitarian Program. The Australian Government controls the level of permanent migration by setting the annual intake for both schemes.

The skill stream of the Permanent Migration Program includes skilled migrants together with their family members. In 2016‑17, almost 39 per cent of skilled migrants were employer sponsored and almost 55 per cent arrived independently with qualifications on the skilled occupation lists while almost 6 per cent came through business innovation streams.

In 2016‑17, over 85 per cent of family stream migrants were the partners of Australian residents, and over 13 per cent were parents.

Following World War II, Australia opened its doors, and in the name of nation building, or ‘populate or perish’, welcomed in the first major wave of migrants, many from the war-torn countries of Europe. Over time, the focus of migration shifted, and instead of targeting a growing population, the goal became to support a growing economy.

In the mid‑1990s, the migration program was significantly expanded and the focus on attracting highly skilled migrants was strengthened. Since that time, migration has comprised more than half of Australia’s population growth, similar to some of the previous peaks in migration in the 1940s, 1960s and 1980s.

Following the Howard Government’s decision to focus the Permanent Migration Program on skilled migration and away from family reunion, the skilled intake has increased more than five‑fold to 129,000 in 2015‑16. By comparison, the family intake remains 20 per cent below the peak levels of the late 1980s.

Two decades ago, skilled migrants and their families accounted for just 30 to 40 per cent of the Permanent Migration Program but they now account for nearly 70 per cent of the intake. The Permanent Migration Program has been set at 190,000 migrants per year for the last six years.

Migrants deliver an economic dividend for Australia as they tend to be of working age and have skills which can contribute to the economy. This in turn leads to higher rates of workforce participation and likely productivity benefits, increasing Australia’s GDP and living standards.

As well as delivering an economic growth dividend, migration improves the Commonwealth’s fiscal position, since migrants are likely to contribute more to tax revenue than they claim in social services or other government support.

The positive effects of migration on economic growth and Australia’s fiscal position are well documented. However, the effects of migration and population growth more generally on the geographic distribution of Australia’s population are less well known.

Migration has played an important role in ameliorating and delaying the adverse effects of our ageing population. Further, migrants generate jobs and economic opportunities for the population more broadly, because they lift aggregate demand through consumption and investment. Temporary migrants also lift our exports, particularly in the education sector.

In general, migrants bring with them productive skills and preferences for goods and services that are different to those of the local-born population. These differences generate wealth that would otherwise not exist by enabling specialisation.

In contrast to international trade, migration realises these benefits onshore rather than being conducted across borders. As such, the gains from migration will be greater than the gains from international trade in goods and services when the migrant has access to more opportunities or resources in Australian than in their home country.

Balanced against these economic gains, high rates of population growth can heighten existing pressures on infrastructure, housing, and the environment and contribute to cultural tensions. Without continuing action to find innovative solutions, high rates of growth may also intensify issues such as congestion and excessive waste production. To fully reap the benefits of immigration and population growth, Australia must continue to explore and address these issues.

Almost half of Australia’s population is either a migrant or the child of a migrant. Australians have therefore consistently shown high levels of support for migration, and the benefits it has brought.  However concerns over house prices, congestion and cultural integration in particular have eroded support in some communities, prompting some commentators and politicians to call for a wider debate on the future of migration to Australia.