Migration is the lazy way to boost economic growth

The COVID-19 pandemic has turned the politics of immigration around 180 degrees:Governments,which only two years ago wanted to slow down the flow of migrants,are now talking about how to increase it.

In the lead-up to the 2019 NSW and federal elections then-premier Gladys Berejiklian and Prime Minister Scott Morrison both called for reductions in immigration to ease the pressure on big cities and “bust congestion”.

The federal government reduced the annual cap for permanent residency visas which is one of the main levers to control migration.

Yet the pandemic closure of the nation’s borders last year,both to permanent migrants and to non-permanent migrants such as international students and short-term skilled workers,has changed everything.

Whereas in 2018-19 net migration was about 240,000,this year about 77,000 more people will leave Australia than move here. The budget papers forecast it will be at least three years before net migration returns to its 2018-19 levels. Ratings agency Fitch says the economy will be two per cent smaller in 2026 because of the migration slump.

As the Herald reported yesterday,Federal Treasurer Josh Frydenberg is now thinking about the “size and composition” of the migration program,while NSW Premier Dominic Perrottet said this week that migration was “part of the solution” to the COVID-19 economic slowdown.

The Australian Chamber of Commerce and Industry,which is concerned about short-term skills shortages,wants the federal government to almost double to 200,000 a year the number of permanent resident visas issued under the skilled migration program.

TheHerald supports reopening borders and a return to normal levels of migration.There are already signs of skills shortages in some sectors of the Australian economy.

But immigration will increase naturally once borders go down and the backlog of flights is cleared.

An additional increase in permanent migration should be treated with caution. A huge jump in migration will strain Sydney’s infrastructure which is still struggling to catch up after the 20 per cent increase in population over the past decade.

It could also undermine the rigour of the selection process. Rather than targeting migrants with the advanced skills who can contribute most to long-term economic growth,the risk is that permanent visas could be given to lower-skilled migrants.

Migration has been at the heart of Australia’s post-war economic success but more recently the rise in gross domestic product that comes with it has disguised a stagnation of living standards.

Governments should not see higher migration as an alternative to the hard economic reforms needed to solve deeper structural problems.

These include the flaws in schooling and vocational education and training which are failing to deliver the skills employers need. Inconsistencies in the recognition of trade qualifications make it hard for workers to move between states.

If Mr Perrottet wants to help employers find workers,he should press ahead with his stalled proposal to replace stamp duty with a property tax. Stamp duty is a tax on people who are selling their house to move closer to work.

If Mr Frydenberg wants to boost economic growth and raise living standards,he should be looking at tax reform,carefully targeted infrastructure investment and a long-term climate and energy policy.

Migration has a place but it is the lazy option for governments unwilling to take on tougher economic reforms to boost productivity.

TheHeraldeditor Lisa Davies writes a weekly newsletter exclusively for subscribers. To have it delivered to your inbox,please sign up here.

Since the Herald was first published in 1831,the editorial team has believed it important to express a considered view on the issues of the day for readers,always putting the public interest first.

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