Source:  Australian Bureau of Statistics (ABS) Australian Demographic Statistics, Dec 2019, catalogue number 3101.0.

Note:  Annual components calculated at the end of each quarter.

 

Migrants have contributed to growth through their consumption - buying up houses, cars, food and everyday goods and services, just like the local born population, with the added bonus that they demand goods and services that are different from the locals.  Skilled migrants, in particular, have expanded the productive capacity of the nation.  By definition they are well educated and of working age.  The former drives innovation and productivity more broadly.  The latter offsets the effects of withdrawals from the labour market as the local population ages.

 

In other words, as I have previously argued in a separate piece, skilled migrants matter for growth.  Pre-pandemic, predictions were that Australia’s migration program will add between a half and one percentage point to annual average GDP growth over the period 2020 to 2050. 

 

Neither migrants nor babies are currently contributing much to growth

 

Those predictions were made by the International Monetary Fund (IMF) in 2017, assuming business as usual.  In 2016-17 the migration program outcome was 183,608 permanent migrants.  That figure has come down every year since.  According to the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO), estimates are that migration will be 154,000 in 2019-20, before falling dramatically to 31,000 in 2020-21.  International travel bans imposed in March 2020, are assumed not to ease up until January 2021 at the earliest.  Only migrants from essential occupations are being let through.  Business has been anything but usual in 2020. 

 

Despite the Treasurer doing his best to encourage a “coronial” baby boom, natural increase cannot be relied upon to make up the shortfall.  The opportunity to form partnerships is lessened when in lockdown.  And, for established partners, it takes more than sex to make a baby boom.  While many may point to the increase in babies born post World War II, many forget that birth rates plunged during the Great Depression.  And that was well before contraceptive use was either possible or legal.  Today contraceptives are widely available.  Many couples will likely put their plans to have children on hold when their household finances are uncertain or depleted.  The Treasury’s own (MYEFO) expectations are that the fertility rate will fall due to the weaker economic conditions and outlook.

 

As a woman with a background in economics, I feel compelled to also point out that even if the Treasurer was successful in encouraging expanding families, this will unlikely provide an immediate economic panacea.  Yes, it might cause money to be spent on a family car, baby essentials and the like.  But it might also cause mum or dad to exit the labour force and leave less household finances available for other more discretionary expenditures.  Further, to the extent that it is mum and not dad who stays home, it risks exacerbating the gender inequalities spurred on by the pandemic.

 

Fewer migrants plus lower fertility equals a predicted slowing of overall population growth to 1.2 percent in 2019-20 and to 0.6 percent in 2020-21 — the lowest annual rate of growth since 1916-17.

 

Mythbusting realities

 

The economic wreckage wrought by the COVID-19 pandemic is like no other.  Just as health professionals are trying to make sense of a previously unknown virus and find either a treatment or cure, economists are trying to make sense of its economic fallout, how best to treat it and put nations on pathways to recovery.  The economic crisis is simultaneously impacting the supply-side of economies – disrupting supply chains and production – and the demand side – as people are less able to spend if they cannot go out, and are less willing to spend on anything other than the bare essentials if they are not sure where their next pay cheque is coming from. 

 

While closing borders was an early step taken by many governments as they sought to contain a health crisis, managed pathways for skilled migrants is arguably one of the best ways out of the economic crisis.  This is because, as implied by the arguments above, skilled migrants positively stimulate both the supply and demand sides of economies.

 

I am, however, pessimistic.  Unless challenged, populous mythologies that migrants will add to Australia’s health and economic woes may prevail.  So, let me acknowledge and address these concerns in turn.

 

First the health risks.  Certainly, unfettered entry into Australia by migrants and travellers would create a health risk.  That is how the virus got into the country after all.  And, prior to the second wave, it was the primary source of its spread.  However, the passing few months have been a very long year over which we have learnt much.  Sometimes by our mistakes.  This includes how to create safe corridors into the country by requiring periods of managed quarantine and testing.  Arguably this will take time to finesse.  And there will be a need to work within capacity constraints to quarantine.  But Australia should be mindful not to take too long and risk squandering an unprecedented opportunity.

 

Right now, Australia features amongst only a handful of nations regarded as relatively COVID-safe places to study, work and live.  So why not capitalise on this advantage in what has typically been a highly competitive race for global talent?  Australia is in an enviable position that it can pick and choose amongst the very best talent that the world has on offer.  And it has the power to dictate terms of entry, including quarantine, testing and other conditions that serve to minimise any health risk and neutralise any fiscal impact.

 

To my rhetorical question in the previous paragraph – why not capitalise on this advantage? – some may have answered in their heads: because Australia has high rates of unemployment and under-employment and this is not going to change anytime soon.  Jobs should go to Australians first and not migrants.  Any significant reopening of the borders should be years down the track when things have returned to ‘normal’.  This is the second myth that I want to call out and challenge – the myth that migrants take our jobs.

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If that is the little voice in your head then you are not alone.  It is the little voice that speaks to many.  The first figure below is derived from responses to an annual survey conducted by the Scanlon Foundation.  Over the period it has been conducted, the Foundation has more than doubled its reach from around 1,550 to over 3,500 respondents to its latest survey.  Their responses have time-after-time demonstrated that the public perception is that migration is closely linked to the rate of unemployment.  That is, if the unemployment rate is high, the majority of those surveyed hold the view that the immigration intake is ‘too high’.  If its low, then fewer take this view.  This collective voice is echoed and amplified in the media and too often listened to by politicians, even though (one would hope) they will have more reasoned voices in their ears.