Australia’s elites are souring on migration. But new data shows its benefits

The Albanese government finished 2023 by backpedalling hard on immigration. After Labor initially oversaw a post-pandemic boom, it unveiled a stricter policy in December, particularly targeting a reduction in foreign student numbers.

The Home Affairs Department now forecasts nearly 185,000 fewer people residing in Australia in five years than previously expected. Home Affairs Minister Clare O’Neil promised to show “vigilance” to achieve this reduction.

The media mostly welcomed the news. Bernard Keane responded in Crikey that high prices were now shining a spotlight on “the impact of large volumes of immigration on housing, inflation and infrastructure”, as well as jobs and wages. He pointed to two sceptical Productivity Commission reports from 2006 and 2016, and concluded Big Australia was a relic of the neoliberal era.

The Australian’s Judith Sloan, herself a relic of the neoliberal era, similarly grumbled last week about a pro-migration KPMG report. “The supposed link between skilled migration and higher productivity, leading to broad economic benefits … there is little rigorous Australian research to back the claim,” she wrote.

Except there is such research, hot off the press. The Organisation for Economic Co-operation and Development (OECD) released three landmark reports assessing Australia’s migration program in the past two months.

Despite the reports dropping shortly before and after Labor’s migration announcement, few journalists seem to have taken notice of them. They paint a less gloomy picture of our nation’s migration boom than the resurgent naysayers in politics and the media.

Migrants ‘take’ jobs, but they also create them

Let’s start with the labour market. The OECD finds that Australia’s migration program “has a lasting positive impact on native employment”, which benefits all skill and age groups. It’s a little uneven across regions, but on average, regions with higher migrant intakes tend to experience faster employment growth.

This confounds reactionary fear-mongering about migrants “taking local jobs” — something economists call the “lump of labour fallacy”. There isn’t a set amount of work to be done, with each migrant getting a job resulting in a local joining the dole queue. Migrants add to both the supply and demand for labour, by spending their wages on local goods and services. And their spending creates more jobs than they “take”.

The OECD found migration had no effect on non-migrant wages. But regions with larger shares of migrants tended to have higher regional wages, which is linked to higher labour productivity. Migrants aren’t just more productive than locals — locals are more productive with more migrants around. Higher educated migrants, particularly those in scientific occupations, also raise patent numbers — a key indicator of innovation.

These findings sit comfortably with numerous other studies showing the positive effects of migration on developed economies, though the specific contours of migration policies can make a difference.

Migrants ‘take’ houses, but we need them to build more

Turning to housing, the picture is a little more complicated. Migrants have to live somewhere, but our sluggish housing system can barely cope with local demand because we’ve choked off supply and lavished investors with incentives to fight over the scraps.

It would be preferable to build more homes, so we can enjoy the work-related and cultural benefits migrants bring to our shores — and for these mostly younger workers to help pay for our ageing domestic population’s pensions and healthcare. But migration will put pressure on rents and house prices until we unblock our building pipeline.

Thankfully, migrants can help with this too. Just like the labour market, migrants don’t have to just add to demand, they can help us increase supply — if we let them.

That’s where O’Neil’s new policy is proving controversial. It allows employers to fast-track visas for migrants earning more than $135,000, taking just seven days from application, for any occupation — that is, except tradies, who have been carved out.

“Our government feels strongly that for sectors like trades, you should have to prove that there is a skill shortage before you start to recruit overseas,” O’Neil said.

Sure, the onus should generally be on employers to prove they face a skills shortage — it’s a nebulous term often abused by frugal bosses to dilute full employment. But if there is one genuine skills shortage in Australia, it is construction.

Infrastructure Australia’s recent report on market capacity in its portfolio — infrastructure, housing and energy projects — found there are only 177,000 workers, despite there being enough demand for 405,000. A gap that size simply can’t be filled by training up locals alone.

If unions are worried about employers using migrants to undercut local wages — a legitimate concern, given how unscrupulous employers have exploited visa schemes in other industries like farming — the government should consider raising the $135,000 threshold for tradies, instead of carving them out altogether. Even better, it could expand public builds alongside tradie admissions to ensure industry expansion.

Absent this, the government’s modest moderation of inflows may be justifiable for now. But pressure is already mounting from the right to curtail migration in increasingly drastic and outright racist ways.

Any further limits risk forging a suboptimal Small Australia, with all its attendant narrow-mindedness, inertia and underachievement. Migrants built modern Australia, and pulling up the drawbridge now will only render our collective future poorer, less equitable and more boring.

Call me old-fashioned, but I like the line in our national anthem about “boundless plains to share”. While others change their tune, let’s not be afraid to sing migration’s praises.