Migrant settler nations at a crossroads on immigration policy

The traditional migrant settler nations are all in immigration policy-tightening mode with Australia still working on repairing the net migration mess inherited by the Coalition. Dr Abul Rizvi reports.

THE FOUR TRADITIONAL migrant settler nations – USA, Canada, Australia and New Zealand – appear to be at a crossroads on immigration policy whilst traditionally non-immigration nations such as China and Japan seek to drive up immigration levels to address their demographic challenges.

Russia’s approach is different again. It prefers to invade other nations rather than use immigration policy to address its demographic decline. The UK and Europe are also tightening immigration policy — but for how long given their demographic challenges?

Traditional migrant settler nations

The traditional migrant settler nations are all in immigration policy-tightening mode. That was after three of them – Canada, Australia and New Zealand – stomped on the student and other visa accelerator at the end of COVID in an unprecedented manner. The USA, whether deliberately or otherwise, allowed a massive increase in unauthorised arrivals from the end of COVID while holding legal migration, including students, relatively steady.

Net migration in September quarter fell — but not enough

Net migration figures have shown a slowing down of entrants into Australia, but not enough to satisfy the Albanese Government.

Canada

Canada has announced it will reduce permanent migration by around 200,000 per annum while also reducing the stock of students and temporary entrants by almost a million over 2025 and 2026. That is the first time one of the four traditional migrant settler nations has planned for negative population growth (as opposed to that happening due to some calamity such as a pandemic, war or economic depression).

Like most major economies during COVID, Canada reduced interest rates to 0.25%. Together with huge fiscal stimulus during COVID and a number of external factors post-COVID, Canada inevitably experienced a rapid increase in inflation after the pandemic. The period immediately after COVID coincided with a rapid increase in immigration, partly due to deliberate policy and partly due to a hot labour market. The population grew in 2023 at a phenomenal 3.1%.

To deal with strong inflation, Canada increased interest rates from 0.25% in February 2022 to 5% by July 2023. The increase in interest rates was so effective in reducing inflation (and increasing unemployment) that from June 2024 to October 2024, Canada reduced interest rates to 3.75%. There is speculation it will reduce interest rates further in December 2024 given its weak labour market.

Canada’s extraordinary turnaround in immigration policy going from a population growth rate in 2023 of 3.1% and then aiming for negative population growth in 2025 and 2026 is in response to a combination of a weakening labour market, with both a strongly rising unemployment rate and a falling participation rate, as well as concerns about the nation’s capacity to keep up with demand for infrastructure and service delivery.

How long Canada continues with negative or very low net migration is to be seen. Canada has a very low fertility rate of 1.26 births per woman, a median age of over 40 and over 18% of its population is 65 or over. Negative net migration will accelerate the rate of population ageing and will quickly lead to a situation where deaths in Canada exceed births. Canada is almost there already with births exceeding deaths in 2023 by only 15,000. All other things equal, a shrinking and ageing population will slow economic growth.

From a demographic perspective, Canada cannot sustain negative net migration for long.

Why Canada has cut permanent migration and Australia shouldn’t

Following a move by the Canadian Government to cut permanent immigration levels, Dr Abul Rizvi analyses why a similar strategy wouldn't work for us.

USA

After two years of record irregular border crossings into the USA, these fell sharply from a peak of 250,000 border encounters in December 2023 to 54,000 in September 2024. This was achieved through a range of controversial measures in how asylum applications were dealt with. These are the subject of legal challenges.

The Migration Policy Institute (MPI) estimates the Biden Administration at end May 2024 had allowed 5.7 million migrants who had crossed illegally into the United States from Mexico or Canada to pursue their immigration cases or were lawfully paroled into the country. This was in addition to legal migration of around 800,000 per annum.

Overall, the Congressional Budget Office estimates that for 2021 to 2024, the USA added over 10 million immigrants across all categories, temporary and permanent.

Unlike the situation in Canada, however, this extraordinary level of immigration coincided with overall employment under Biden rising 12% (around 15 million additional jobs), average pay rising 19% and unemployment down from 6.7% to 4.1%. It was certainly unusual that job growth and unemployment of around 4% coincided with interest rate increases and falling inflation, both of which usually hurt the labour market.

During COVID, interest rates in the USA fell to 0.5% but as inflation took off, these increased between March 2022 and July 2023 to 5.5%. They have now fallen to 4.75% with more falls likely as the US economy cools.

While the Trump Administration is unlikely to increase legal migration, it will tighten border policies further. That may require legislative change to reduce asylum rights further. It has also promised to implement a mass deportation program, targeting between 10 and 20 million people, including a massive backlog of asylum seekers.

Trump intends to use the military to raid worksites in search of undocumented migrants. That will cause both chaos and massive errors in who is detained and deported as this is specialist work that the military is not trained in.

There are significant legal, financial and practical challenges to such a program, especially as it would involve the detention of hundreds of thousands of people before they can be deported. It is highly unlikely Trump will get anywhere near his deportation targets, especially in the first year or two in office.

Trump's immigration policies a potential human rights violation

Donald Trump's immigration policies could send the U.S. down a path of mass deportations, tent cities and razor wire.

Nevertheless, even if a small percentage of Trump’s target is achieved, the overall impact will be a dramatic fall in net migration compared to the Biden era, possibly into negative territory. That will be in conjunction with a massive increase in tariffs and a proposed $2 trillion cut in government spending. All things equal, that would slow economic growth and increase unemployment. Further cuts in interest rates now seem inevitable.

The USA has a lower median age than Canada at 38.3, a 65-and-over population of 17.3% and a fertility rate of 1.62 births per woman. On a demographic basis, the USA can sustain low immigration for longer than Canada.

In terms of its competition with China, the USA has a substantial demographic advantage being younger; with births continuing to significantly exceed deaths and with longstanding experience in effectively using immigration policy to economic advantage. China is facing rapid population ageing and shrinkage and almost no experience in managing migration.

New Zealand

After negative net migration every month from March 2021 to September 2022, net migration boomed as NZ opened up, particularly to students and temporary workers. This peaked in the 12 months to October 2023 at 136,381. It has subsequently fallen in every month to September 2024. In the 12 months to September 2024, it was 44,900. In the 12 months to September 2024, there were a record 133,000 departures, including 79,700 NZ citizen departures offset by 24,900 NZ citizen arrivals.

As in the USA and Canada, inflation in NZ increased sharply after COVID rising from 1.4% in December 2020 to 7.3% in June 2022. To deal with this, the NZ Reserve Bank increased the official cash interest rate from the COVID low of 0.25% to 5.5% from October 2021 to May 2023. This has subsequently fallen from 5.5% in July 2024 to 4.75% in October 2024. Inflation in NZ for the 12 months to September 2024 was 2.2%.

Over the past 12 months, the unemployment rate in NZ has increased from below 4% to 4.8% in September 2024 and is likely to rise further. This will have contributed to the fall in arrivals and increase in departures to record levels. Net migration to NZ is likely to continue to decline while the labour market remains weak.

NZ’s fertility rate is a relatively high 1.84 births per woman. In 2023, births of 56,955 exceeded deaths of 37,884, leading to a natural increase of 19,071. The median age is 38 and the population aged 65 and over is a comparatively low 15.5%.

From a demographic perspective, NZ can sustain low net migration for longer although its current outflow of NZ citizens will be concerning as a large portion of these are skilled people of working age who are being attracted by Australia’s strong labour market.

Kiwis pour into Australian labour market

An increase of New Zealand citizens arriving in Australia will set further challenges for the Government to achieve its net migration forecast.

Australia

Australia also experienced negative net migration during COVID associated with a weak labour market and closed international borders. To stimulate the economy and prevent a blowout in unemployment, the Government significantly increased wages and other subsidies as well as the Reserve Bank steadily cutting interest rates down to a low of 0.1% by November 2020.

Due to concerns about labour shortages and the large departure of overseas students, at the end of COVID, the Coalition Government stomped on the student and working holidaymaker accelerator in an unprecedented manner. Net migration in 2022-23 boomed to over 500,000 — a level never before recorded.

The Labor Government was slow to respond to the blowout in net migration and is now struggling to get that back under control, particularly as the labour market has remained much stronger than in Canada or New Zealand.

As in many other nations, inflation in Australia also increased sharply after COVID. It was the inevitable consequence of massive fiscal and monetary stimulus during COVID as well as a number of external factors. To deal with this, the Reserve Bank increased interest rates from 0.1% in April 2022 to 4.35% by November 2023.

Interest rates in Australia were not increased as much as in the other three migrant settler nations but also have not yet begun to fall, partly because the labour market has remained much stronger.

The strength of the labour market is also limiting the Government’s ability to bring down net migration. On current policy settings and an unemployment rate of 4.1%, it is highly unlikely the Government will meet its 2024-25 net migration forecast of 260,000.

The Coalition’s proposal to cut net migration to 160,000 would be impossible without a very sharp deterioration in the labour market, perhaps even sharper than the one Canada is currently experiencing, as well as a wide range of controversial policy changes that would attract the ire of many industries and lobby groups.

Australia’s fertility rate has fallen to a record low of 1.5 births per woman. We have a median age of 38 and 16% of the population is aged 65 and over. At present, births exceed deaths by around 100,000 per annum.

From a demographic perspective, Australia is better placed than Canada. We can sustain lower levels of net migration for longer but need to monitor this closely as very low levels of net migration would accelerate population ageing and mean we reach a point where deaths exceed births more quickly.

That is not a point that any nation wants to pass too quickly. Hence the importance of a more rational discussion of net migration than the current politicised hysteria.

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.