Migration: it’s not just a numbers game - Grattan Institute

Public debate about migration policy in Australia tends to swirl around just one thing: picking a number. As our borders reopen, debate is again raging about the size of Australia’s annual migrant intake. It may even turn out to be a big election issue.

But how many migrants is just one part of our migration policy. Who gets to come is just as important as how many. Migrants are people. They come in all shapes and sizes. People make different contributions to Australia, and we should structure our policy accordingly.

While temporary migration dominates the headlines, permanent visas matter most over the long term. For the past four years, the federal government has allocated 160,000 permanent skilled and family visas each year.

Even when the borders were closed because of COVID-19, these visas were granted, mostly to people already in Australia on a temporary visa. Without a permanent visa, most would eventually go home.

To whom we grant permanent visas matters enormously. Granting a permanent visa to a 25-year-old will have different consequences for the Australian community than granting permanent residence to a 60-year-old. For skilled visas, age and skills matter.

We calculate that the federal government’s recent decision to increase the number of Business Innovation and Investment visas has reduced the lifetime fiscal dividend for Australia from each annual permanent skilled migrant intake by about $2 billion.

This is because people who get a Business Innovation and Investment visa are older, less educated, and speak poorer English than other skilled migrants. Not surprisingly, they earn lower incomes and therefore pay less in taxes.

Australia should target migrants who can fill high-wage jobs rather than specific occupations.

Despite the title of the visa, there is no evidence to suggest these migrants are exceptionally innovative or generate additional investment. If anything, their poor proficiency in English makes it more difficult for them to play a meaningful managerial role in growing businesses in Australia.

Despite these poor outcomes, the Business Innovation and Investment visa continues to thrive. It has a catchy name but there is nothing beyond the label. Financial industry leaders support it because they profit from the various rules about managing investments and purchasing existing businesses.

The government should abolish this visa, and it should reallocate the places to different skilled-worker visa categories – via employer sponsorship or the points test.

Grattan Institute calculations show that if this change were made, the federal government could reap an extra $3.7 billion in personal income tax receipts alone over the lifetime of each annual intake of new permanent migrants – and the ultimate fiscal dividend for Australia would be higher still.

Sponsorship rules need to change

Beyond swapping business visas out for more skilled-worker visas, Australia should also target migrants who can fill high-wage jobs rather than specific occupations.

At the moment, employers can sponsor people into jobs only when their occupation is deemed eligible. This has bizarre, damaging consequences.

It means, for example, that a data scientist cannot be sponsored for permanent residency in Sydney, and a multinational technology company is forced to treat software engineers and data scientists differently because of their occupation.

A mining company cannot sponsor many machinery operators regardless of what it pays them.

The policy should be changed because jobs, and the wages they offer, are a better guide to skills than occupations. Rather than drawing up lists of occupations that would benefit from skilled migrants, the government should assess which migrants bring valuable skills simply by looking at the wages their jobs attract.

If Australia introduced a wage threshold of $80,000 – the equivalent of median annual full-time earnings – we could stop relying on those clunky and out-of-date occupation lists and instead focus on what matters: the wages employers are willing to pay to workers.

This would create a simple system that would benefit Australia by attracting skilled workers – and it would reduce uncertainty for employers and would-be permanent migrants.

Rethinking permanent skilled migration along these lines would enable Australia to give priority to younger and higher-skilled workers for whatever number of permanent skilled visas we choose to issue.

Migration policy cannot be reduced to a single number. We should stop pretending it can be.

Henry Sherrell

Migration Deputy Program Director
Henry is a policy analyst with experience in government, consulting, and research. Prior to joining Grattan, Henry worked as an independent researcher focusing on Australian and international immigration policy. He has worked for the Department of Immigration and Citizenship, the Migration Council Australia, a Federal MP, the Federal Parliamentary Library, and the Development Policy Centre at the ANU.

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