Skilled temporary visa holders: A barometer for the Australian economy

For at least 20 years, the much-maligned skilled temporary visa – formerly sub-class 457 and now sub-class 482 – has tracked the relative state of the Australian economy.

The number of these visas increased strongly under the Howard Government until the Global Financial Crisis; they fell sharply after that before increasing again when the Rudd/Gillard Government injected stimulus into the economy.

The Abbott Government’s 2014 austerity budget led to Australia’s unemployment rate, which had traditionally been lower than the New Zealand rate, rising to remain consistently above that of New Zealand ever since. That started both lower net movement of New Zealand citizens to Australia and a steady decline in the number of skilled temporary visa holders in Australia (see Chart 1).

Home Affair Minister Peter Dutton’s ham-fisted changes to skilled temporary entry in 2017-18, accelerated the decline. COVID-19 will ensure that decline continues for at least another six months. Over the past four months to July 2020, a net 4,100 skilled temporary entrants have left Australia.

The total number of people on this visa has fallen from a peak of just under 200,000 in 2013-14 to less than 130,000 in June 2020. Applications for skilled temporary entry were falling sharply well before COVID-19 appeared.

In the June quarter of 2020, just 326 offshore skilled temporary entry visas were granted after consistently ranging between 10,000 and 20,000 per June quarter for the past ten years.

That will be cause for joy as many believe skilled temporary entrants deny unemployed Aussies a job — perversely that is even among those who agree that skilled migrants generally create more jobs than they take. Skilled temporary entrants are the major feeder group to the permanent residence employer-sponsored categories.

Primary skilled temporary entry visa holders must have a participation and employment rate of 100 per cent and be paid either the minimum salary for skilled temporary entry or the award rate, whichever is the higher.

They must pay the full rate of income tax and the GST on goods and services. They must hold private health insurance, as they are ineligible for Medicare. They are also ineligible for JobKeeper or JobSeeker. Their sponsors are required to pay into the Skilling Australia Fund to fund training for more Australians.

That is why finance ministers and treasurers around Australia love skilled temporary entry.

Many will argue we do not need skilled temporary entry when unemployment is so high. And it is true there will be reduced demand for skilled temporary entry while the labour market is weak.

But as Australia’s economy recovers or governments invest in economic recovery, skill shortages will emerge as they always have. Until governments and businesses invest adequately in training (if that is ever entirely possible), the bulk of unemployed Australians will remain those with few employable skills. At the same time there will be difficult and dirty, low paying jobs Australians will not want to do (note long-standing desire of Australian farmers to recruit labour from Pacific Islands).

The history of demand for skilled temporary entry highlights the prominence of mining industry sponsors during the mining boom. That has now declined.

On the other hand, demand in the health care and ICT industries has remained relatively stable. As Australia’s population ages, demand in the health care industry will inevitably rise, as will demand in ICT, simply because of the need for modern economies to continue to modernise.

The steady decline in the accommodation and food industry since 2017 reflects the impact of Dutton’s visa design changes that have put small and medium businesses at a major disadvantage in using skilled temporary workers. It also reflects the impact of COVID-19 on the tourism industry.

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The impact of COVID-19 on Australia’s international education industry with massive job losses will ensure demand for academics and researchers will also weaken.

The decline in demand for skilled temporary entry has been partly offset by growth in the new "Global Talent Independent" visa. But this visa carries a high risk of abuse that will become more prominent as numbers grow.

As we move into recovery phase, it would be far more sensible to revisit Dutton’s ham-fisted changes to employer-sponsored entry, rather than to rely on the Global Talent Independent visa — a visa that harks back to the problems prior to codification in 1989.

Perhaps those lessons have been forgotten and will need to be relearned?

Some parts of the labour movement will continue to decry skilled temporary entry — and there were undoubtedly examples of abuse and worker exploitation with skilled temporary entry in the past that still need to be addressed.

But the fact is both the Howard Government and the Rudd/Gillard Government made extensive use of skilled temporary entry as part of their strategy for economic recovery — we will need to do so again.

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Abul Rizvi is an Independent Australia columnist and a former Deputy Secretary of the Department of Immigration, currently undertaking a PhD on Australia’s immigration policies. You can follow Abul on Twitter @RizviAbul.