Albanese Government reforms skilled visa after Dutton's 'sledgehammer' approach

After former Immigration Minister Peter Dutton took a sledgehammer approach to the temporary skilled visa years ago, both Coalition and Labor ministers have been trying to undo the damage.

Under pressure from the business community, Coalition ministers David Coleman and Alex Hawke tried to process these visas faster than Dutton allowed but were reluctant to undo most of Dutton’s changes – perhaps fearing Dutton’s wrath.

The Albanese Government has made five main changes to Dutton’s approach:

Increased the minimum salary to around $70,000 after the Coalition had left this at around the $53,000 level the Coalition inherited in 2013. This was consistent with Matthias Cormann’s “deliberate design feature of our economic architecture” of keeping wages as low as possible. It is reported the Department of Home Affairs is making much greater use of data matching with the Australian Taxation Office (ATO) to ensure minimum salaries are paid and are not making inappropriate deductions. That is positive.
Opened up pathways for skilled temporary visa holders to employer-sponsored permanent residence. For some inexplicable reason, Dutton thought closing these pathways was good policy thus leaving growing numbers of temporary residents in immigration limbo.
Streamlined processing, including reducing the use of the labour market testing charade, enables faster processing times that both employers and employees consider is critical.
Made changes aimed at reducing the scope for exploitation of skilled temporary entrants.
Introduced a national labour agreement for aged care workers with a minimum salary concession but consistent with the higher salary aged care workers are now paid.

So what has been the impact to date?

Pressure on Government as net migration yet to peak

Arrivals and departures data for the September quarter of 2023 suggests record net migration has still not peaked.

The number of skilled temporary entrants in Australia has increased very marginally from 130,004 at the end of June 2023 to 130,451 at the end of December 2023. The nationality mix shifted with a substantial fall in Chinese (from 9,687 to 4,132) and Indian nationals (from 30,074 to 26,161) and increases in Philippine (from 14,694 to 15,852) and UK nationals (from 13,139 to 13,624). The stock will likely rise over the next few months as those who left for Christmas return to Australia in early 2024.

The stock is also affected by those skilled temporary entrants who secure permanent residence, mainly visa employer-sponsored visas, as well as the strength of the labour market. The number of skilled temporary entrants in Australia plunged in 2014-15 when the unemployment rate increased to six per cent.

Skilled temporary visa grants in the six months to December 2023 were 31,351 offshore (a decline on the 36,639 in the six months to December 2022) and 15,383 onshore (a decline from 20,198 in the six months to December 2022). Some of this decline may be due to the higher minimum salary requirement that was increased to around $70,000 from 1 July 2023.

In terms of major nationalities, onshore skilled temporary visa grants for the six months to December 2023 (compared to the six months to December 2022) were:

India: 1,996 (4,119)
China: 520 (931)
Philippines: 2,257 (1,800)
UK: 2,109 (2,429)

In terms of major nationalities, offshore skilled temporary visa grants for the six months to December 2023 (compared to the six months to December 2022) were:

India: 6,392 (12,556)
China: 1,460 (898)
Philippines: 4,359 (3,735)
UK: 3,390 (3,537)

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The rise in visa grants from the Philippines is likely associated with registered nurses who have salaries above $70,000 per annum and/or aged care workers who have a salary concession from the standard minimum salary requirement. The sharp decline in visa grants from India is likely the impact of an unwillingness to pay salaries above $70,000, particularly in the hospitality industry. But that should not be affecting the IT industry, which is a major user of the skilled temporary entry visa from India.

In terms of industry sectors, the major shifts in primary skilled temporary visa grants comparing the six months to December 2023 with the six months to December 2022 were:

Decline in information, media and telecommunications from 2,819 to 1,637.
Increase in health and social assistance from 3,406 to 3,646. Given the crisis in health and aged care, I would have expected a larger increase.
Decline in accommodation and food services from 2,566 to 2,053, this is unsurprising.
Increase in agriculture, forestry and fisheries from 737 to 1,038, this is surprising given the traditionally low salaries in this sector. The risk is employers are paying higher salaries but forcing workers to pay over the odds for accommodation, transport and so on.
Increase in education from 615 to 652.
Decline in construction from 2,245 to 1,755, this is surprising given the current shortage of traditional tradies for housing construction.
Decline in finance and insurance from 961 to 708.
Increase in mining from 846 to 1,070.
Increase in manufacturing from 1,642 to 1,986.
Increase in electricity, gas, water and waste from 286 to 548. This may be linked to rising renewable energy projects.

Despite a very strong labour market, skilled temporary entrants contributed relatively little to record net migration in 2022-23. This may be due to state governments making greater use of state-nominated visas and the more generous temporary graduate provisions.

While there remain issues with the temporary skilled visa that need to be monitored closely, the changes the Albanese Government has made to this visa have been generally well received by both employer bodies and the unions. That has to be a positive.

Dr Abul Rizvi is an Independent Australia columnist and a former Deputy Secretary of the Department of Immigration. You can follow Abul on Twitter @RizviAbul.