Does ‘catch-up’ explain record net migration in 2022?

The recent upsurge in net migration has been attributed to border closures during the pandemic, but Dr Abul Rizvi explains the real factors contributing to it.

SHANE WRIGHT, in the Sydney Morning Herald, says the Government is arguing ‘much of the increase [in net migration] is due to a catch-up caused by the border closure’. While high net migration in 2022-23 will partly offset the low net migration during the pandemic, the “catch-up” argument seems more of a media talking point than a policy explanation given net migration in 2022 significantly exceeded all Treasury forecasts.

The real explanation for record net migration in 2022 (and to date in 2023) is a mixture of COVID-era policy settings put in place by the Coalition Government (and retained by the Albanese Government until 1 July 2023) and an ultra-hot labour market.

Wright’s article follows the Australian Bureau of Statistics (ABS) last week releasing its preliminary estimate of net migration in 2022 of a record 387,000. I wrote on surging net migration through the second half of 2022 and summarised the situation in January 2023.

Struggle street ahead for new migrants if jobs forecast on target

Temporary entrants and new migrants will struggle to survive if the weakened job market predicted by Treasury in 2023-24 plays out alongside the expected surge in net migration.

The ABS explains that:

“Recovery of international student arrivals is driving net overseas migration to historic highs, while departures are lagging behind levels typically seen over the past decade. This pattern is expected to continue as international students return following the reopening of international borders, however, there are fewer students ready to depart because very few arrived during the pandemic.”

This is only partly correct. Certainly, offshore demand for overseas student visas boomed throughout 2022. Chart 1 highlights that since international borders re-opened, monthly offshore student visa applications have consistently been 20% to 30% higher than the pre-COVID records for the same months.

This was driven to a significant degree by former Immigration Minister Alex Hawke’s decision to grant unlimited work rights to overseas students. That not only trashed the reputation of Australia’s international education industry but essentially converted the student visa into a low-skill, unsponsored work visa.

But the low rate of student departures in 2022 and to date in 2023 was not due to the low rate of student arrivals during the pandemic. It was due to a number of COVID-era policy changes that enabled students (and former students) who were already in Australia to remain rather than depart.

For example, in the six months to December 2021, 59,157 student visa holders already in Australia secured another student or other visa. In the six months to December 2022, 160,303 student visa holders already in Australia secured another student or other visa.

A very large number of student visa holders secured:

the special fee-free COVID visa stream of subclass 408 — currently around 100,000 mainly former students hold this visa which provides full work rights; or
a temporary graduate visa driven by more generous provisions for access to this visa — the number of temporary graduate visa holders increased from around 95,000 at end 2021 to almost 190,000 currently.

A significant number of students and/or temporary graduates will also secure either a skilled temporary visa or skilled permanent visa due to the record skill stream in 2022-23.

The high level of net migration in 2022 was driven not just by overseas students but also by a surge in working holidaymakers (19,324 at end 2021 and 112,335 at end 2022).

The big unknown contributors (until ABS publishes more detailed estimates of net migration) will be visitors extending their stay after arrival and Australian citizens resuming overseas careers.

Chart 2 shows that there was a surprising jump in the excess of visitor arrivals over departures in 2018 (153,070) and 2019 (140,330) which contributed to a record contribution of visitors to net migration. In 2018, visitors contributed 60,810 to net migration of 248,440 (24.5%) while in 2019, visitors contributed 100,280 to net migration of 247,620 (40.5%).

In 2022, the excess of visitor arrivals over departures was a record 546,940. Will that again have contributed significantly to the surge in net migration in 2022?

On the other hand, the net movement of Australian citizens in 2022 was a record negative net 530,490. The vast bulk of this group will not be counted in net migration as they will have only left Australia for a short holiday. But a portion will be going overseas for a longer working holiday or to pursue career opportunities overseas. They may be counted in net migration.

Could Albanese Government have acted earlier to limit net migration?

Some have argued the Albanese Government should have acted earlier to prevent the record surge in net migration, particularly given the current housing crisis. But that ignores three crucial factors.

Firstly, throughout 2022 the focus was on addressing labour shortages. The complaints about labour shortages were a reality, not just the usual bleating of business lobby groups. Job vacancies throughout 2022, and to date in 2023, have been well over 400,000 and often approaching 500,000. These were unprecedented levels of job vacancies.

While it is easy to criticise in hindsight, no government would have taken any steps in 2022 that would limit access to labour.

Paths for the Albanese Government to improve immigration in 2023

After disrepair in the visa system and implementing urgent interim measures, 2023 will have to be a year of immigration policy action for the Albanese Government.

Indeed, in the second half of 2022, Opposition Leader Peter Dutton was criticising the Albanese Government for not increasing immigration fast enough. Some were suggesting labour shortages and their impact on supply chains were contributing to rising inflation.

Secondly, it seems there was no advice going to the Albanese Government until well into 2023 that net migration was blowing out. Responsibility for forecasting net migration has, since Mike Pezzullo has been Secretary of Home Affairs, shifted to the Treasury Department (a truly bizarre development given Home Affairs holds most of the relevant policy levers and data).

Until May 2023, Treasury’s forecasts provided no indication of the surge in net migration that took place in 2022 (see Table 1). This was despite clear indications to the contrary from around August/September 2022, particularly in the overseas student data but also in the movements data.

Finally, once the Albanese Government was made aware of the blowout in net migration, it was far too late to bring forward the relevant policy tightening actions, most of which had already been announced to start from 1 July 2023.

What now for net migration?

While Treasury has forecast a gradual decline in net migration from 2023-24, there are five main factors that will drive whether Treasury’s forecasts are accurate:

the extent to which the labour market will weaken as forecast by Treasury — in every past instance that the labour market has weakened in Australia since at least 1974-76, net migration has fallen, often with the Government accelerating this with additional policy tightening;
impact of the COVID-era policy settings that will be reversed from 1 July 2023;
details of how the policy tightening recommended by the Parkinson Review will be implemented — these details may not be announced until later in 2023;
implementation of more normal levels of immigration compliance activity with the allocation of $50 million over four years following the Nixon Review and action to address migrant worker exploitation; and
ongoing targeting of key skills in the health, education and I.T. areas and in addition the Aged Care Labour Agreement and the Pacific Australia Labour Mobility (P.A.L.M.) and the new Pacific Engagement Visa (PEV) — these will require very careful management.

From a political perspective, however, perhaps the biggest immigration risk for the Albanese Government will be if asylum seeker application numbers continue to rise in conjunction with very high refusal rates and low rates of departure of refused asylum seekers. In May 2023, there were almost 1,900 new asylum applications with a refusal rate of over 97%. The total number of refused asylum seekers in Australia who have not departed is now around 74,000 with a primary application backlog of around 28,000 and an asylum backlog at the Administrative Appeals Tribunal (AAT) of over 39,000.

As the labour market weakens and temporary entrants (particularly overseas students with limited work rights) find it increasingly difficult to secure other visas due to policy tightening, more will turn to asylum as the only means of maintaining their lawful status (and temporary access to work rights).

While the origin of the surge in unsuccessful asylum seekers started from 2015 with Peter Dutton’s failure to act, that will not stop him or the Murdoch press from turning up the heat on the Albanese Government to deal with the issue.

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.