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Increased immigration the key to prosperity – study

16 March 20150 comments
Photo: AAP Image/Dean Lewins

Photo: AAP Image/Dean Lewins

Australia will need more than 250,000 new migrants a year to raise living standards and add $1.6 trillion to the economy, according to a new study.

The report commissioned by the Migration Council of Australia says a steady climb in the migration intake will be crucial to tackling the long-term pressures on the nation as it heads towards a population of 40 million by 2055.

The continued arrival of young migrants will be essential to dealing with the ageing of the population, according to the study titled The Economic Impact of Migration’.

Prepared by consulting group Independent Economics, the report says the economic contribution of migration to Australia has been significantly undervalued.

“Australia’s projected population will be 38 million by 2050 and migration will be contributing $1,625 billion (1.6 trillion) to Australia’s GDP,” the report says.

“Moreover, migration will have added: 15.7 per cent to our workforce participation rate; 21.9 per cent to after tax real wages for low skilled workers; and, 5.9 per cent in GDP per capita growth,” it says.

“Overall, by 2050, each individual migrant will on average be contributing approximately 10 per cent more to Australia’s economy than existing residents.

“The economic impact of migration flows through into every aspect of the economy. It has a profound positive impact not just on population growth, but also on labour participation and employment, on wages and incomes, on our national skills base and on net productivity.

“Set out in terms of the three ‘Ps’ — participation, productivity and population — migration is a significant factor,” the reports says.

It says that in the absence of a migration program, Australia’s population in 2050 would be just 24 million.

“With the program we project a population by 2050 of 38 million,” the report’s authors say.

“This population increase adds economic gains in and of itself, however the interaction of migration with our economic indicators is complex, and the returns go far beyond the benefits of simple population gain.

“Over the next 35 years, migration will drive employment growth. As migrants are concentrated in the prime working age group and are relatively highly educated they have a positive impact on the employment rate.

“By 2050, the percentage gain in employment of 45.1 per cent outstrips the population gain of 37.0 per cent. Further, migration will ensure Australia remains a highly skilled nation, as it will have led to a 60.4 per cent increase in the population with a university education,” the report says.

It says migration provides savings across the population in costs related to education, transfer payments and government network infrastructure.

“Migrants who initially enter Australia on a student visa pay the full costs of their education, providing a saving to the government budget compared to the subsidised places offered to Australian–born residents,” report says.

“Further, the elderly are under–represented in the migrant intake, so migrants generate only a limited increase in government payments. Finally, because of fixed costs, per capita expenditures on government network infrastructure fall as migrants boost the population.

“Overall, the gain in GDP per capita combines with the net fiscal benefit of migration to lead to a rise in household consumption. Comparing this with the population gain, migrants offer a premium boost to the economy compared to Australian born residents.

“Importantly, this premium is shared with Australian residents. As the budget bottom line improves, personal income tax rates can be lower and this in turn supports higher household consumption,” the reports says.

The research argues that by 2050, real after–tax wages would be significantly higher.

The study is backed by the head of the federal government’s commission of audit, former Business Council of Australia Chairman Tony Shepherd, who has warned that the migration intake should be maintained at current levels then rise in the years ahead to confront the challenges of an ageing population.

“As the population rises we should consider raising the (migrant intake) rate, having regard to our capacity for absorption,” Mr Shepherd said.

Laurie Nowell
AMES Senior Journalist