Politics Analysis

How international education will be affected by net migration target

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The Government is far from getting annual offshore student visa application rates well below 300,000 (Photo via UNE Photos | Flickr)

There is still much work to be done for the Albanese Government to achieve its net migration goal of 235,000 yearly, including tightening of student visa policy. Dr Abul Rizvi reports.

THE ALBANESE GOVERNMENT has assumed a long-term net migration forecast of 235,000 per annum starting from 2026-27 with it falling to 250,000 in 2024-25. To reduce net migration to that level and maintain it will require significant further policy tightening, including for student visas. But where will that leave the future size of Australia’s international education industry in terms of overseas students in Australia?

There are three main ways to look at this:

  • net migration arrivals and departures;
  • changes in the stock of student and temporary graduate visa holders; and
  • student visa applications and grants.

Net migration arrivals and departures

Prior to the pandemic, net migration was around 240,000 per annum (see Table 1), although the 2019 Budget forecast net migration rising to over 270,000 per annum for the Forward Estimates period — that was the “back in black” Budget. That Budget was heavily dependent on high levels of net migration. While the 2019 forecast budget surplus was not realised, former Treasurer Josh Frydenberg knew most budget surpluses in the past 25 years have occurred at the same time as a high level of net migration, a strong labour market, high levels of job creation and associated tax revenues.

(Data source: ABS overseas migration)

Table 1 shows that net migration fell from 262,490 in 2016-17 to less than 240,000 in 2017-18 and 2018-19. This was partly due to a reduction in the size of the permanent migration and humanitarian programs (including an illegal restriction on partner migration) that reduced the contribution of these to net migration from 85,250 in 2016-17 to 67,300 in 2017-18; 61,590 in 2018-19; and 46,000 in 2019-20.

Other key contributors to the small decline in net migration in the period immediately before the pandemic were:

  • some ham-fisted changes to skilled temporary entry policy that briefly reduced the contribution of these categories to net migration; and
  • offset by ongoing strong contributions to net migration from working holiday makers and visitors extending stay after arrival, including applying for asylum during the biggest labour trafficking scam in Australia’s history.

Despite the reduction in net migration prior to the pandemic, student arrivals contributing to net migration during that period increased strongly. Student departures also increased but more slowly. As a result, the contribution of students to net migration increased from 88,020 (43%) in 2015-16 to 112,170 (47%) in 2018-19.

The seeds of a boom in student numbers were already in place prior to the pandemic. Policy changes during COVID-19 (such as unrestricted work rights, COVID visa, fee-free student and working holiday maker applications) ensured we would have a boom. In 2022-23, net migration increased to the unprecedented level of 528,420 (see Table 2).

(Data source: ABS overseas migration)

Compared to the pre-pandemic period, the high level of net migration was driven by both a boom in arrivals and lower departures.

In more detail, we saw:

  • Student contribution to net migration increase to 267,670 or 50.1%.
  • Working holiday maker contribution to net migration increase to 70,848 or 16.7% (prior to the pandemic, working holiday makers were contributing around 20,000 to 25,000per annum to net migration).
  • Visitor contribution to net migration increase to 86,660 or 16.7% (prior to the pandemic, visitors were contributing around 50,000 to 60,000 per annum to net migration although this increased to a record 98,900 in 2019-20. The Coalition Government did nothing about this and the Labor Government has been far too slow to act).
  • Skilled temporary entry contribution to net migration increased to 43,540 or 8.2% (prior to the pandemic, skilled temporary entrants were contributing around 10,000 to 15,000 per annum to net migration).
  • Other temporary entry contribution to net migration was 14,810 or 2.8% (prior to the pandemic, other temporary entrants were contributing between -15,000 to -20,000 to net migration as this category includes departures of people on temporary graduate visas and bridging visas). Few people arrive on these visas and hence the contribution is negative. It also includes people on the new Pacific Australia Labour Mobility (PALM) visa, growth of which is likely to have contributed to the increase in the contribution of this group to net migration.
  • NZ citizen contribution to net migration increased to 24,210 or 4.7% (prior to the pandemic, NZ citizens were contributing around 6,000 to 8,000 to net migration).

Despite larger permanent migration and humanitarian programs in 2022-23, these contributed only 58,930 or 11.1% to net migration. By comparison, prior to the pandemic, these programs were contributing around 60,000 to 85,000 per annum to net migration. A larger portion of the migration program is being filled by former overseas students and other temporary entrants already in Australia.

Australian citizens contributed -32,200 to net migration in 2022-23 which is a larger outflow of Australian citizens than prior to the pandemic. During the pandemic, there was a major inflow of Australian citizens. The large outflow in 2022-23 may reflect those Australian citizens now returning overseas.

Temporary entrant stocks

The other way to look at this is through the prism of stock data. Prior to the pandemic, temporary entrants in Australia (including NZ citizens and visitors) peaked at 2.41 million in December 2019. Post-pandemic, the peak was 2.76 million in December 2023 (see Table 3).

(Data source: data.gov.au)

Prior to the pandemic, students peaked at 633,816 in September 2019 and after the pandemic at 664,178 in September 2023. During the pandemic, the number of students in Australia reached as low as 315,949 in December 2021. The stock of students in Australia at end February 2024 is likely to be over 700,000 — a new record.

The large surge in students in Australia was due to three factors:

  • clearance of part of the extraordinarily large bridging visa (BV) backlog that peaked at 369,182 in March 2022. This would not have affected net migration as most of the students in the BV backlog would have already been counted in net migration;
  • the arrival of students who had already received a student visa either during or prior to the pandemic and were waiting to enter; and
  • processing of the record offshore student visa applications from February 2022 to at least January 2024.

The number of temporary graduates in Australia grew steadily from 21,911 at end December 2011 to 107,865 in September 2020. It fell to 88,694 at end June 2021 before rising strongly to 199,772 at end June 2023.   

If the Government’s long-term forecast for net migration of 235,000 per annum is to be achieved and it keeps the permanent migration and humanitarian programs at current levels, then the rate of growth in the stock of temporary entrants in Australia would slow, but keep rising. That is because there aren’t enough permanent migration places available for those students, temporary graduates and other temporary entrants who want a permanent place at a net migration level of 235,000 per annum.

That would be contrary to the Government’s stated policy of reducing reliance on temporary migration.

Depending on its policy settings, that would include ongoing growth in the stock of both students and temporary entrants, albeit at a slower pace. Note that net arrival of students in February 2024 was 147,700 which means that at end February 2024 we would have exceeded the previous record number of students in Australia. It is likely the stock of temporary graduates in Australia also hit a new record.

Student visa applications and grants

Offshore student applications have set new records from February 2022 onwards (see Chart 1). Despite massive student visa policy changes and record refusal rates, January 2024 offshore applications were only slightly below the January 2023 record.

Total offshore student visa applications in 2022 were 362,209 and in 2023 were 440,419. Such high application rates are completely inconsistent with net migration of 235,000. The Government will need to get annual offshore student visa application rates well below 300,000. At this stage, it is a long way from that.

(Data source: data.gov.au)

The high refusal rate has meant offshore student visa grants have pulled back much more (see Chart 2). Monthly offshore student visa grants have been below the record for the equivalent month ever since August 2023. Policy tightening started in July 2023.

(Data source: data.gov.au)

Total offshore student visa grants in 2023 were 342,180, well above the previous record set in 2022 of 281,856. Offshore student visa grants in 2024 will be well below the 2023 level but will need to also be below the 2022 level. To get to net migration of 235,000, offshore student visa grants will need to fall significantly further than the level in 2022.

(Data source: data.gov.au)

Leaving aside the backlog clearance exercise in November and December 2022, onshore student visa applications and grants in both 2022 and 2023 have been well above the levels consistent with net migration of 235,000. Onshore student visa grants in 2019-20 were a then record of 175,286. In 2022-23, onshore student visa grants hit a new record of 207,316 but have fallen back to 147,109 for calendar year 2023.

Recent policy changes to limit onshore student applications will drive these numbers down much further. It would be surprising if onshore student visa grants in 2023-24 were not below 100,000 and even lower in calendar year 2024. This will particularly affect private VET providers and lower-tier universities which will struggle to recruit new students in 2024.

Reducing net migration to 235,000 per annum

The level of net migration is generally a function of the relative strength of the labour market (a strong labour market attracts people and discourages them from leaving) and policy settings.

Treasury had forecast a much weaker labour market in 2023 that did not eventuate and partly explains the high level of net migration in 2023. The labour market does appear to now be turning down which may help the Government reduce net migration. Despite that and the measures the Government has taken to date, it appears unlikely it has done enough to get net migration in 2023-24 down to its forecast of 375,000.

So what are the major policy changes the Government has implemented post-pandemic that would impact (positively or negatively) future net migration?

First, the Government has increased the permanent migration program from 160,000 per annum to 190,000 per annum plus 3,000 places for the new Pacific Engagement Visa (for no apparent reason, the permanent resident PEV is not counted as part of the permanent migration program).

The new direct pathway to Australian citizenship for NZ citizens, bypassing the permanent residence stage, effectively expands the number of places for citizens of other nations by around 5,000 to 10,000 per annum. While around 65% of migration program visas go to people already in Australia long-term and hence already counted in net migration, the policy changes to permanent migration will increase the direct contribution of the program to net migration from 57,570 in 2022-23 to around 80,000 per annum.

Second, the Government has increased the humanitarian program to 20,000 per annum. The offshore humanitarian program in 2022-23 was delivered at 15,785 plus 2,000 onshore protection visas. If onshore protection visas remain around 2,000 per annum (most of these people will have arrived as visitors or students), the offshore humanitarian program may increase from 2023-24 by over 2,000 per annum. That will add directly to net migration.

Third, the change in policy on NZ citizens appears to have contributed to an increase in their contribution to net migration. This is likely to continue as long as the Australian labour market is comparatively stronger than that of NZ. The new policy may add around 10,000 per annum to net migration to a long-term average of around 15,000 per annum.

Fourth, the Albanese Government has announced a tightening of policy on visitors extending their stay after arrival (including by applying for student visas) as well as visitors applying for asylum. Time will tell how effective these measures will be in getting the visitor contribution to net migration down from 66,560 in 2022-23. Getting this contribution down to 50,000 per annum would be a major achievement given the rate of growth in this prior to the pandemic.

Fifth, the Coalition Government significantly loosened policy on working holidaymakers (WHMs), including:

  • allowing a third WHM visa;
  • increasing the range of industries in which WHMs can work to be eligible for a second and third visa;
  • increasing the maximum eligibility age for a number of nations from 30 to 35;
  • adding a number of countries to the work and holiday (W&H) visa;
  • increasing the cap on W&H visas by 30%; and
  • making these fee-free applications when international borders re-opened.

The Coalition Government also announced that WHM visa applicants from the UK would be automatically eligible for a three-year visa. This came into operation from 31 May 2023.

These changes significantly increased demand for WHM/W&H visas during 2022-23 and would have contributed to the record contribution of WHM/W&H visas to net migration in 2022-23 of 86,660. While the Albanese Government has removed some of these changes, including the 30% increase in the W&H visa cap, at this stage the policy position on WHM/W&H visas remains highly facilitative.

Without significant further policy tightening and a much weaker labour market, it is unlikely the contribution of WHM/W&H visas to net migration will fall much below 40,000 per annum. Tightening policy in this space would draw a strong critical reaction from the tourism, hospitality and agriculture industries.   

Sixth, the Albanese Government has made a number of sensible changes to the skilled temporary entry visa, including increasing the minimum salary for this visa that had been frozen for a decade. Australian employers are heavily dependent on this visa to fill key skill gaps, particularly in health/aged care, education and IT. The new aged care labour agreement is a significant development in this regard.

Due to the long-term demands of Australia’s health and aged care sector, it is unlikely the contribution of skilled temporary entry to net migration can be reduced much below 43,130 in 2022-23 without a major weakening of the labour market. A decline below 30,000 is highly unlikely given this is a key visa pathway to the permanent employer-sponsored visa which has a planning level of around 35,000.

Seventh, the other temporary entry grouping includes visas to assist the agriculture industry. While the Albanese Government has abolished the agriculture visa which would have seen a boom in asylum applications contributing to net migration, it has retained the PALM visa which will continue to make a substantial contribution to net migration.

Another key part of this visa grouping is people departing while on the temporary graduate visa. Those departures slowed significantly in 2022-23 and should pick up in 2024-25 once the Albanese Government implements its announced changes to this visa.

The Albanese Government has also returned $50 million over four years in funding for the immigration compliance function after this had been gutted under the Coalition Government. This should result in some increase in the removal of temporary entrants whose visas have expired as well as people on bridging visas.

This should lead to a reduction in the contribution of this grouping to net migration from 13,080 in 2022-23, possibly back to around zero.   

Finally, it is unlikely that the very large net outflow of Australian citizens of 35,040 in 2022-23 will continue long-term. Most likely this will revert to around 20,000 per annum.

Taken together and excluding students, this gives a long-term net migration outcome of around 195,000 per annum (see Table 4). These estimates would be highly sensitive to the state of the labour market. If the current strong labour market is sustained, net migration is unlikely to fall to these levels.

(Table supplied)

The above leaves a student contribution to net migration of around 40,000 per annum (or around 90,000 net migration student arrivals and 50,000 net migration student departures). The student contribution to net migration has not been that low since 2012-13. Policy tightening in other areas would allow a larger student net migration contribution but not significantly larger.

There are three things we can conclude from this.

If the Government is to get net migration down to a long-term average of 235,000 per annum, then:

  • the contribution of students to net migration will have to fall significantly (that is even if the Government tightens policy in other areas);
  • growth in the stock of student visa holders and temporary graduate visa holders in Australia will have to slow very markedly; and
  • offshore student visa applications and grants will have to fall much further.

While the Government moved far too slowly to tighten student visa policy (it was clear student numbers were booming by November 2022), there are significant lags in developing new policies, implementing those and seeing data revealing their impact. Because of this, it is difficult to see how the Government could get net migration in 2024-25 down to the forecast of 2,000 and the long-term forecast of 235,000 per annum.

The risk is the Government will panic and introduce poor policies such as a massive increase in student visa fees in the upcoming budget. A more sensible approach would be along the lines recommended by the University Accord (encourage overseas students to undertake courses in key skill shortages) and to introduce regulations that ensure only high-performing students can be granted an offshore student visa.

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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