The immigration numbers bidding war is pointless – there are limits to how many migrants Australia can accept

Since late last year, various business lobby groups, the NSW government, management consultant KPMG, the Business Council and now a number of economists have been throwing numbers around, talking up the need for higher levels of immigration.

I have written previously on the facile nature of the immigration debate in Australia, on the part of both the groups calling for “immigration to be cut wherever possible” and the groups calling for a bigger Australia.

The problem is the debate focuses on targets and numbers for permanent migration, often confusing this permanent migration program with what matters for population which is net migration. At the same time, too little attention is paid to how migration targets would be delivered, the risks involved, and how the risks would be managed.

So let’s start with basics.

What matters is net migration

The official migration program reflects the number of permanent resident visas issued in any one year, irrespective of whether the person is already in Australia (perhaps for a long time on a different sort of visa) or has been living overseas.

Over the past 15 years, more than half of these permanent resident visas have been issued to people who have already been living long-term in Australia.

Net migration as calculated by the Australian Bureau of Statistics is a measure of long-term and permanent arrivals, including new people issued these visas, less departures of people who have been living long-term in Australia and intend to remain overseas for 12 out of the next 16 months.

It is blind to visa status or citizenship.

Read more: A myth that won't die: stopping migration did not kickstart the economy

Net migration can fall sharply even when the migration program is large, as happened in 2014-15 when we had one of the largest permanent migration programs in Australia’s history, yet net migration fell to 180,000.

A sharp fall in net migration is usually associated with a weak labour market leading to large outflows of Australians, or Australians deciding not to return, as happened in 1975-76, 1982-83, 1991-92 and 2008-09.

On the other hand, even when the migration program is being cut, net migration can be forecast to rise. This is what happened in the 2019 budget, when Treasury forecast the highest sustained level of net migration in our history, after a year in which the migration program was cut from 190,000 to 160,000 per year.

How many migrants, and which ones?

Before discussing the various immigration targets that have recently been proposed, it’s useful to understand the government’s current forecasts and how it intends to deliver them – something surprisingly few do.

The 2021-22 program has been set at 160,000 per year. But Treasury’s 2021 Population Statement assumed to increase to 190,000 per year from 2023-24.

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There is no official government commitment to this increase to 190,000 – and there probably won’t be ahead of the election. There has also been no indication of the composition of this larger program, or what might be needed to deliver it.

Planning documents say the 2021-22 migration program will be split evenly between the family stream and the skill stream. This is because the government is at last clearing the very large backlog of partner applications it (unlawfully in my view) allowed to build up.

If the planned 72,000 partner visas in 2021-22 are delivered, the government might only need to allocate around 50,000 places for partners in future years because it will have cleared much of the backlog it has allowed to build up, which will result in a future overall family stream of around 60,000.

This means that to deliver its total program of 160,000 from 2022-23, the government will need an extra 22,000 skilled migrants, and from 2023-24 when the total program increases to 190,000, an extra 52,000 skilled migrants.

The current skill stream planning level of 79,600 has four main components.

There is scope to boost the number of these visas by processing them faster. However, even with a very strong labour market, it is highly unlikely that demand would rise much above 35,000 per year, especially if a more robust minimum salary requirement and strong monitoring of compliance with employer obligations are re-introduced to minimise the risk of wage theft.

The passive investment subset of these visas, which provides visas to people who make a financial investment for a set period of time, is essentially a “buy a visa” scheme. It should be either abolished or modified to ensure active investment.

I resisted establishment of the passive investment component until I left the department of immigration in 2007. Long-term, removing it would cut the number of business innovation and investment visas to around 5,000 per year.

This visa is highly susceptible to cronyism and corruption and attracts few migrants who wouldn’t otherwise qualify for other more robust visa categories. It should either be abolished or pared back to a few hundred per year for highly exceptional candidates.

While the labour market is strong, there would be merit in increasing the allocation of places for these visas, as state governments are well placed to understand the needs of their jurisdictions. But it is unlikely they would be able to fill more than an additional 10,000 places per year, given the occupational targeting and employment criteria they have in place.

Once again, while the labour market is strong, there is scope to increase the size of this category, but there are also risks that would need to be managed.

As these migrants have no confirmed job and face a four year wait for access to social security, diluting criteria for this visa to increase the numbers would mean a rising portion would struggle to secure a skilled job.

Those with options may leave to another country where job prospects are stronger. Others would be forced to take whatever job they can, including at exploitative wages.

In my experience, increasing the size of this visa category to more than around 25,000 would involve substantial risks, especially if the labour market weakens once current stimulus measures are removed.

190,000 won’t be easy to deliver

In total, what I foresee gives us a skill stream of around 100,000. Together with a family stream of 60,000, that provides only enough to fill the existing program of 160,000 per year – not enough to increase it to the 190,000 proposed by Treasury or the 220,000 proposed by the Business Council of Australia.

Those proposing much higher levels of immigration need to demonstrate how they would be delivered and how the risks of what might be a weaker labour market would be managed.

And they need to acknowledge that the size of the migration program doesn’t determine net migration. That’s in large measure determined by the economy and how many Australians and migrants decide to leave, decide to stay overseas, or decide to return.