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Analysis – Australia’s migration headache

2 June 20200 comments

Australia faces a sharp fall in migration over the coming year because of the COVID-19 pandemic, putting at risk decades of economic growth, economists say.

Prime Minister Scott Morrison confirmed that the nation faces its first real shortage of migrants in recent history.

“We’re looking at net overseas migration, I think, falling to 34,000-odd next year,” he told the National Press Club this week.

“When you think that – it was Professor Peter McDonald who set a figure of between 160,000 and 210,000 as being what you need in this country to maintain a GDP-per-capita growth – then there’s obviously a big gap there,” he said.

In other words, the country is at least 126,000 – and maybe as many as 176,000 – people short of where it needs to be for the economy to continue to grow at pre-pandemic levels.

One the best estimates, the size of the COVID-19 economic contraction in June means there may be some economic growth but it will almost certainly not return the economy to where it was before it started shrinking.

The shortfall may be even greater than these figures larger when you factor in that net overseas migration – which makes up more than 60 per cent of the country’s population growth – has in recent years contributed more like 250,000 people per year.

So, however you look at, the nation is short hundreds of thousands of people to help grow the economy.

These are people who fill essential skills shortages, start businesses, pay taxes, buy goods and drive construction.

“That’s a short-term gap, but it’s going to be one of the real impacts of this crisis because our borders aren’t opening up any time soon,” Morrison said.

Most economists do not expect borders to really open until the middle of next year.

But the Prime Minister said there were ways to manage the shortfall.

“We’ll be working with the higher education sector, but I note 80 per cent of the international students that come to Australia are here,” Mr Morrison said.

The Prime Minister also repeated that a “cross-Tasman safe travel zone” to be set up with New Zealand is on its way allowing some small amount of tourism.

But with New Zealand’s population less than five million, it doesn’t make up for the rest of the world.

And there is still the tangIe of interstate restrictions across Australia to sort out.

“It may well be that Sydneysiders can fly to Auckland before they can fly to Perth, or even the Gold Coast, for that matter,” Mr Morrison said.

We know that migration is a key driver of economic growth in Australia. And we know that migrants and refugees are more likely than native-born Australians to innovate and start businesses. 

But in an era of such uncertainly, it may be a while before we again see an influx of migrants and refugees into Australia.