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Grattan Institute's first report on skilled permanent migration like the curate's egg

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The Grattan Institute has released a report on how to reform permanent skilled migration in Australia (Screenshots via YouTube)

The Grattan Institute has released its first report on permanent migration, Re-thinking permanent skilled migration after the pandemic, making six recommendations.

While there is discussion in the report on temporary visas, including the key role these play as a feeder to permanent migration, Grattan has made no recommendations about temporary visas. This is surprising given how inextricably the two are linked.

Grattan’s first recommendation is that all Business Investment and Investor Program (BIIP) visas should be abolished as it is concerned the large increase in places for these visas in 2020-21 to over 13,000 places will increase the number of older migrants with poor English language skills. It should be noted this increase is due to backlog clearance as the Government had allowed a very large backlog of BIIP applications to build up (approaching 40,000) due to limits on BIIP places in previous years to 7,000 or less.

In other words, increasing places for BIIP visas was not so much a policy choice but a legal necessity to start clearing the backlog unless the Government is prepared to use the capping provisions in the Migration Act 1958.

It will take a number of years to clear the backlog even though the Government has announced all new BIIP visa applications from 1 July 2021 will be provisional visas requiring adequate performance after arrival before the provisional visa holders can move onto permanent residence. The shift to provisional visas will reduce demand for BIIP visas, as will the current difficult relationship with China. The lions’ share of BIIP visa applications is from mainland China. Given the change scheduled for 1 July 2021, it is highly unlikely the Government will abolish these visas in the next few years at least.

Nevertheless, there is merit in Grattan’s argument for the abolition of investor visas within the BIIP. These are little more than a “buy a visa” scheme. Abolition of these would, however, be strongly resisted by state governments who benefit from the injection of cash from these visas into state government investment vehicles.

There is less merit in Grattan’s argument for the abolition of BIIP visas for temporary entrants who successfully establish and run a business in Australia that employs a minimum number of Australians for a minimum period (with appropriate concessions for regional Australia). Abolition of that pathway to permanent residence would leave temporary entrants, including former overseas students who establish such businesses, in immigration limbo. They would likely be forced to sell their businesses if they have no pathway to permanent residence.

Grattan does not explain how this would be a positive for either Australia or for the temporary entrants who have successfully established and run businesses in Australia or for the employees of these businesses.

I strongly agree with Grattan’s recommendation to scale back and evaluate the new Global Talent Independent (GTI) visa. This visa is an extraordinary contortion of the legal requirement that successful visa applicants in this new category have ‘an internationally recognised record of exceptional and outstanding achievement’. In addition, the subjectivity of requirements of this visa makes the risks of cronyism and fraud just too great. I wrote on this earlier this year.

Grattan is critical of regional concessions in the skilled visa system arguing for a purist “let the market decide” approach. While the changes the Government made to some of these visas as part of the Morrison Government’s “population plan” in March 2019 certainly need to be revisited, Grattan provides little evidence to support abolition of regional concessions (as it did in an earlier draft of its report that I saw but now recommends these be reviewed because migrants to regional Australia earn lower salaries).

In my view, Grattan places excessive reliance on the economic and budgetary contribution of migrants as the overriding criterion for assessing permanent skilled migration policy. The current design of immigration policy enables state governments to nominate skilled migrants with specific qualifications to settle in different parts of regional Australia for an initial period — that includes regional NSW and Victoria.

It is true that people such as doctors, teachers and nurses who are required to settle in regional Australia will generally earn less than if they had settled in Sydney or Melbourne. But from a broad public policy perspective, ensuring regional communities have access to services delivered by such skilled migrants has important societal benefits that Grattan fails to acknowledge. Economists often forget people live in societies and communities as well as in an economy.

Left to the market, we would likely see the ratio of doctors, teachers and nurses to population in Sydney and Melbourne rise further as that is where the best-paid job opportunities are and the ratio in regional Australia fall. It is not clear why this reflects good public policy. The skill needs of different regions can vary considerably. State governments and regional authorities are well placed to use skilled migration visas to target local skill needs. No state government or regional authority would support the removal of its power to nominate skilled migrants in this way. That any Commonwealth government would abolish these regional visas, including abolition of the additional points for having studied in regional Australia as proposed by Grattan, would not only be poor public policy but also politically naïve.

Grattan is opposed to occupational targeting in both employer-sponsored visas as well as points-tested visas. The argument that employer-sponsored visas, both temporary and permanent, generally do not require occupational targeting is very sensible. Genuine employers are best placed to determine the skills they need, whether they can source them from within Australia or need to go overseas.

The recommendation the minimum salary for employer-sponsored migration be raised to $80,000 also has merit. This minimum salary has not been increased since 2013 — an absolute scandal. In the early 2000s, I convinced former Immigration Minister Philip Ruddock to abolish labour market testing in employer-sponsored visas — labour market testing is well known as just a charade that wastes time and money but achieves little else. This was on condition there would be a strongly monitored, enforced and comparatively high minimum salary level; serious penalties for employers who breach their obligation to pay these salaries with significant restrictions on the use of “in-kind” payments to meet the minimum salary requirement.

The question supporters of labour market testing fail to consider is why it is needed for the high skill jobs that employer-sponsored migration is designed to fill but not required for much larger visa categories such as students, working holidaymakers, temporary graduates, points tested migration and, indeed, New Zealand citizens where many of the jobs taken are in direct competition with unemployed Australians with few post-secondary skills.

In 2017-18, former Immigration Minister Peter Dutton introduced an array of additional requirements for employer-sponsored visas, including re-introduction of labour market testing, but failed to increase the minimum salary — the most important reform that was needed. That led to a sharp fall in employer-sponsored visa applications. As Grattan points out, employer-sponsored migration delivers the largest economic benefit. The current inquiry by the Joint Standing Committee on Migration is likely to unwind many of the changes Dutton made. That is positive but it will achieve little unless the minimum salary is also increased as recommended by Grattan.

In doing so, the Committee would need to consider an appropriate minimum salary level concession for regional Australia as well as how skilled occupations such as aged care nurses would be managed. This occupation has been and will continue to be in long-term shortage, but have comparatively low salaries.

I strongly agree with Grattan’s suggestion there are too many occupational lists and these should be rationalised. However, the complete abolition of occupational targeting in the points tested categories would be a retrograde step as it relies on the assumption that the market will adjust and sort it all out. There is very little evidence that it will other than in theoretical models and assumptions used by economists.

While some skill shortages are indeed temporary as Grattan suggests, others have persisted for decades. For example, most nursing occupations have been in shortage ever since the recession of the early 1990s. Most I.T. specialisations, many engineering, telecommunications and a range of trade qualifications have been in shortage since the late 1990s. Despite efforts made by successive governments to encourage more Australians to develop qualifications in these fields, these shortages have persisted and there is little on the horizon that suggests this is going to change any time soon. In some states, shortages in key industries have also persisted for most of the last two decades such as in the mining industry in Western Australia and the Defence Industry in South Australia.

Another factor supporting the need for occupational targeting is that new skilled migrants face a four-year wait for access to social security. Unless there is a very strong labour market in Australia, the risk of new migrants becoming destitute or being forced to leave Australia if they cannot secure a job becomes significant. Occupational targeting can help reduce this risk. During periods when the labour market is weak, a substantial number of skilled migrants leave Australia permanently or for the long term (as well as Australian citizens).

Occupational targeting is also important in terms of the signals to international education providers and prospective overseas students of the qualifications that are most likely to be in long-term demand in Australia. Overseas students have been a key feeder group for skilled migration for almost 30 years. Until the early 2000s, government policy was that students should go home after completing their courses, even though students had been successfully migrating to Australia since before the Colombo Plan.

In the early 2000s, I convinced Philip Ruddock to abolish provisions that enabled immigration decision-makers to refuse a student visa application if they suspected the student had an interest in permanent migration. This was in conjunction with clearer pathways to permanent residence for highly successful students. That policy was reversed from 2008-09 when former Immigration Minister Chris Evans introduced the Genuine Temporary Entrant (GTE) test and made pathways to permanent residence more obscure. A number of further changes in recent years have made those pathways even more unclear.

Despite those changes, successful students have continued to supply a substantial part of the skilled migration intake. It has meant, however, that policy design must be less than optimal with education providers having to disguise how they promote their courses and students having to hide their long-term plans and hopes. The lack of clarity has led to education providers focusing on courses that are cheap to deliver and maximise profits and students preferring courses that have cheap tuition fees.

Hence, we have a massive portion of students who have undertaken accounting, finance and commerce courses. These students have very limited pathways to a points-tested visa or even an employer-sponsored visa. It has created the risk of leaving a large portion of students in immigration limbo — a risk the Government continues to underestimate but could be reduced through a more transparent approach to the link between overseas student policy and permanent migration.

The Government has now set both the level of the migration program at 160,000 per annum and the forecast level of long-term net migration at 235,000 per annum. Overseas students finding a pathway to permanent migration will inevitably form a large part of delivering these forecasts. In delivering this forecast, the Government can send the right signals for the kinds of skills we will need in both the short and long term, with mechanisms that reward quality education delivery and penalise poor quality education providers as is now the case in the UK. This would help maximise the benefits of immigration irrespective of views on the level of immigration.

Alternatively, we can continue to rely on an opaque policy framework and hope the market will sort it out — an approach that has demonstrably failed over recent years.

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.

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