Australia’s major economic challenges could be solved by a better skilled migration system, according to a new report.

A lack of productivity growth, growing debt in the federal budget and the economy’s transition to net-zero could be assisted by key reforms, the submission by the

Public policy think tank, the Grattan Institute says a lack of productivity growth, growing debt in the federal budget and the economy’s transition to net-zero are all issues facing Australia into the future.

In a submission to the federal government’s migration review, the institute laid out strategy that could boost government finances by $159 billion over thirty years. 

It says that in the past decade, only a quarter of permanent visas were issued to migrants based on their skills with the rest granted through family and humanitarian streams.

While this reflected the diverse objectives of Australia’s migration program, the government should target permanent skilled visas at younger, higher-skilled migrants, it said.

This would allow them to stay in Australia for longer and contribute to the economy.

Another recommendation was to change policy to ensure permanent employer sponsorship was available for workers earning more than $85,000 a year in any industry.

This move would better target migrants with valuable skills, simplify the sponsorship process, offer clearer pathways to permanent residency and boost Australian government budgets, the institute said.

It also said while the temporary visa system helped to fill worker shortages, they also made up most of the pool for permanent applications which meant that program should also be targeted towards highly skilled migrants.

Another key recommendation was to abolish the Business Investment and Innovation Program, which prioritises older and less-skilled migrants.

The institute estimated these reforms could boost federal and state government budgets by a combined $159 billion over the next three decades and by $27 billion over the next decade alone.

But it warned against expanding intakes of less-skilled migrants to meet worker shortages and said it risked undercutting wages and increasing exploitation.

The submission said such a plan could also erode public trust in Australia’s migration program and fuel concerns about the nation becoming a “guest worker” society.

In September, the home affairs minister, Clare O’Neil, announced that Australia would raise the permanent skilled migration cap to 195,000 placed this year, up from 160,000.

The review of Australia’s migration system, being carried out by former Treasury and Prime Minister and Cabinet Secretary Martin Parkinson, academic Joanna Howe and businessman John Azarias, is expected to release a report by the end of February.