Reading the federal budget documents isn’t considered the most exciting way to spend an evening by most people.
As your stats guy, I eagerly downloaded the docs on Tuesday night and scrolled through the technical notes. This is where the significant assumptions made in the budget are listed. Only one thing interests me: net migration projections for the next five years.
These numbers, however, should be taken with a bit of caution. Any treasurer will be tempted to exaggerate the net migration figures. If you write thousands of extra migrants into your spreadsheet yourself, you’ve magically created money that you can distribute for fun things like infrastructure or social benefits.
No one loves migrants more than the treasurer. Do you remember the 2019-20 budget? The famous “Back in black” budget? Two weeks before the budget, the Prime Minister announced a reduction in migration – a somewhat desperate move to please the right wing of his party, a bid to win an election that seemed almost lost.
The fine print of the budget then revealed migration assumptions well above the recently announced migration figures – higher in fact than the previous ceiling. Without exaggerating the migration figures, the figures of the 2019-2020 budget could not have claimed the “return to black”.
Then the pandemic hit, and all budgeting was null and void anyway. However, there would never have been a black budget even without the pandemic.
Before looking at the net migration assumptions in the current budget, we need to quickly review the past 120 years of Australia’s migration history. Buckle up for a lightning-fast migration history.
In the early 1910s, revolts in Europe led to the first major wave of migration to Australia in the 20th century.
The greatest flow of migrants on record occurred during World War I when the ANZACs departed for European and Middle Eastern theaters of war.
Immediately after World War I, the return of the ANZACs, coupled with European refugees, led to record numbers of immigration. A moderate influx of migrants occurred until the Great Depression of the 1920s and 1930s.
Before the end of the Second World War, Australia experienced virtually no migratory movement. Immediately after World War II, migration figures dipped back into the negative when American soldiers stationed in Australia returned home.
From the 1950s to 2000, Australia increased its population by around 90,000 migrants per year on average. There were, of course, phases of relatively higher and relatively lower migration. The decline around the mid-1970s, for example, was (along with the introduction of birth control pills and no-fault divorce) the reason that Generation X is an exceptionally small generation. From 2000 to 2019, Australia doubled its number of migrants to an average of 195,000 per year.
The peak occurred in the 2008-09 financial year when 300,000 migrants came to Australia during the mining boom. The record consumption of 2008 reignited the Big Australia debate. Migration has been cited as being responsible for all societal ills – congestion, property prices, lack of social cohesion.
It’s a little too simplistic in my book. In planning circles, we say that there is no size or density of population that is simply too large for a system – there is always only inadequate physical and social infrastructure.
The dramatic mistake that Australia allowed itself to make during the 2000s and 2010s was to grow population at a faster rate than infrastructure. An additional problem that regions with very high population growth rates face is that the agile private sector can deliver housing quickly while the less agile public sector tends to deliver infrastructure at a much slower pace.
When the pandemic hit, Australia lost migrants in net terms for the first time in 75 years. Instead of adding 195,000 migrants, Australia lost around 90,000 – in net terms, this translates to a loss of 285,000 people.
Instead of collapsing, the Australian property market has reached record highs. Blaming migrants for these highs was not an option this time around. The general mood in Australia has returned to pro-migration policies. Otherwise, how could we fill all those vacancies that the industry is complaining about?
In times of record unemployment, migrants are not accused of stealing jobs, but are seen as desperately needed.
This brings us back to the budget. All industries are pushing for occupations that are lacking in their sector to be added to the skilled migration list. About 90,000 places for skilled migrants will be made available after about 10,000 places have been reallocated from the family visa category. High migration assumptions in the budget are welcome, but are they realistic?
The previous two pandemic budgets in 2020 and 2021 assumed that the negative net migration figures of the first year of COVID were going to be followed by another year of negative migration. I was positively surprised to see that the 2021-22 financial year should end with a positive net migration.
Before COVID, a net inflow of 41,000 migrants would have been considered very low – now it is the start of a rapid V-shaped recovery. Since the opening of international borders in December, the stock of temporary migrants (essentially due to the return of international students) increased by approximately 98,000.
The budgetary assumptions of positive net migration in 2021-22 seem very credible. The assumptions for the next few years do not seem too far off the mark given that international demand for migration to Australia is likely to remain high enough to easily fill up to 235,000 places (this is the assumption for 2025 and 2026 ).
If you’re worried that the new wave of migration will drive up house prices, don’t worry. New migrants will almost exclusively be international students and skilled migrants who will largely head to the weak inner city rental markets. The market can easily absorb a few hundred thousand migrants.
We’re good for a year or two, but let’s not be lazy this time.