Australia faces significant economic harm, including a worsening budget deficit position, if skilled migrant numbers are not restored, according to a new report.

The new research by BIS Oxford Economics reveals overseas migrants have an employment participation rate of 92 per cent compared with just 66 per cent for the overall working age population.

The research says the loss of migration associated with the international border closure will result in 1.1 million fewer residents in Australia in 2030-31.

This means the population will be smaller and older than previously expected, which will result in a longer-term structural deficit than previously predicted by Treasury.

BIS Oxford Economics chief economist Sarah Hunter said Sydney and Melbourne captured 75 per cent of temporary workers and permanent residents, with migration levels remaining relatively stable at around 220,000 a year over the past decade, before COVID struck.

From April to November last year, just 4400 migrants arrived in Australia, down from 63,000 over the same time frame in 2019.

International students make up the largest category of overseas arrivals, with full fee-paying students bringing in revenue for universities, spending on local goods and services, requiring housing and access to public amenities as well as generating revenue for local retail, recreational activity and housing services.

The Committee for the Economic Development of Australia (CEDA) says one of the biggest problems facing all business right now is a shortage of skilled labour.

CEDA CEO Melinda Cilento says that despite the unemployment rate of 5.6 percent, employers have reported having to pay higher wages to skilled workers to keep them.

“Skilled migration is obviously critical to how we reimagine our recovery and how we sustain that recovery,” Ms Cilento said.

“With borders closed, we are seeing a skills shortages emerge. It’s a message I’m hearing consistently across a wide range of sectors.

“We have done research that shows both temporary and permanent migration are both really important contributors to our labour force,” Ms Cilento said.

Meanwhile, property developers are calling for a return to positive net migration levels in light of the BIS research, which shows migrants were responsible for 57 per cent of Australia’s population growth over the past decade and are among the biggest buyers of housing.

The Urban Taskforce, which works on behalf of developers, called for a return to positive net overseas migration as soon as it was safe to do so.

“This is vital for all sectors, not just construction which employs around 10 per cent of the Australian population and stimulates a chain of economic activity,” said Urban Taskforce chief executive Tom Forrest.

He said the planning system needed to be more flexible, and to ramp up the level of housing approvals to ensure supply can accommodate a rapid return of migrants and address the “dangerous price bubble” we see today.

Mr Forrest said the BIS made it clear that immigration was a substantial contributor to economic growth.

“Migrants create jobs — they don’t take them — migrants generate more tax revenue because of their high levels of tertiary education, income, skills and relatively low age. We need more migrants to improve the ratio of taxpayers to non-taxpayers, which is in long-term decline across Australia,” he said.