Politics Analysis

Struggle street ahead for new migrants if jobs forecast on target

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Many newly arrived migrants will have to take any job at any rate of pay as they have no access to social support (Image by Ketut Subiyanto via Pexels)

Temporary entrants and new migrants will struggle to survive if the weakened job market predicted in 2023-24 plays out alongside the expected surge in net migration, writes Dr Abul Rizvi.

WHILE IN 2022 we saw by far the highest number of job vacancies ever along with massive employment growth, particularly in the tourism sector, we may also yet see the highest level of net migration in our history.

Rapid employment growth and high levels of net migration are co-travellers — Australians will need to get accustomed to that fact, especially as our population ages further and population growth is increasingly driven by migration and less by natural increase.

Federal Treasurer Jim Chalmers has already indicated Treasury’s net migration forecasts may be too low.

For 2021-22, Treasury’s most recent estimate of net migration is 150,000 while the preliminary estimate produced by the Australia Bureau of Statistics (ABS) for the same period is 170,900. I suspect this preliminary estimate may be revised upwards once ABS has more data on the massive excess of visitor arrivals over departures in June 2022 and the extent to which they have extended stays.

As international borders did not re-open until late in 2021, it is likely the vast bulk of the 170,900 net migration in 2021-22 occurred during the first six months of 2022. From this alone, it is evident that net migration in 2022 will be much higher than Treasury forecast in its October Budget.

The Australian Government has forecast net migration in both calendar 2022 and 2022-23 at 235,000 — Treasury likes that number, but it has little to do with an analysis of immigration policy settings. From movement data (that is, arrivals minus departures) in 2022 as well as an examination of visa applications and grants, we can get a gauge of how accurate that forecast may be.

Students

From movement data, it is clear students will be a major contributor to net migration in 2022. Student arrivals in 2022 were 456,050 — far exceeding departures of 243,640 by 194,250. This excess of student arrivals over departures far exceeded the previous record of 113,270 in 2008.

Offshore student visa applications in 2022 set an all-time record far exceeding anything we have seen before, possibly by 20% to 30%. That confirms a very high level of new student arrivals in 2022 as well as in the March quarter of 2023.

The contribution of students to net migration in 2022 will be much more than 100,000. The previous calendar-year record contribution of students to net migration was in 2008 when students contributed 120,940 to overall net migration of 315,690 (that is, 38%) and in 2018 with students contributing 109,320 to the overall net migration of 248,440 (that is, 44%).

Visitors

The next biggest contribution to net migration will be visitors extending their stay after arrival. Visitors' contribution to net migration has traditionally been relatively small but has steadily increased over the past decade to an astonishing 100,280 in 2019 (that is, 40% of total net migration).

This will have at least partly been due to the gridlock in the visa system leading to people entering Australia on a visitor visa rather than the visa they really wanted, as well as the effects of the pandemic which may have led to many family visitors who arrived in 2019 remaining in Australia during 2020 and 2021.

While the visitor contribution to net migration fell into negative territory when international borders were closed, movement data suggests that in 2022, visitor contribution to net migration has again increased significantly.

Movement data shows visitor arrivals exceeded departures in 2022 by an unprecedented 546,940. In most years prior to 2018, visitor arrivals and departures balanced out close to zero or even into negative territory. In 2018, however, there was a 153,070 excess of visitor arrivals over departures and in 2019 it was 140,330. (see Chart 1).  

Source: ABS arrivals and departures

While most of these visitors will depart before they have been in Australia for 12 months out of 16 and hence won’t be counted in net migration, it is notable that a large excess of visitor arrivals over departures has persisted since June 2022. This suggests a substantial portion of visitors remain in Australia long-term by applying for other visas after arrival.

In 2018, around 40% of the excess of visitor arrivals over departures were counted towards net migration. In 2019, this increased to an extraordinary 71%.

Around 200,000 of the excess visitors arrived in December 2022. Let’s assume all of these will depart Australia while on their initial visitor visas (that is, January to March 2023). That still leaves an excess of around 340,000 visitor arrivals over departures in the previous 11 months of 2022.

If this cohort of 340,000 visitors extends its stay at the same rate as in 2018 (that is, 40%), that means visitors could contribute well over 130,000 to net migration in 2022. If they extend their stay at the same rate as in 2019 (that is, 71%), the contribution would be even larger.

Permanent visa holders and net migration

Prior to the pandemic, permanent visa holders were contributing between 60,000 and 80,000 per annum to net migration. While the Federal Government's Migration Program in 2022-23 has been increased to 195,000, this will not result in a large increase in the contribution of permanent visa holders to net migration in 2022 for two reasons.

Firstly, in the first half of 2022, there were relatively few offshore applicants who had been granted permanent visas with the program heavily focused on onshore applicants.

Secondly, in the second half of 2022, the Department of Home Affairs (DHA) was well behind pro rata in delivering the larger migration program. That would suggest it is unlikely the contribution of permanent visa holders to net migration in 2022 will be far outside the 60,000 to 80,000 range.

Skilled temporary entrants

Skilled temporary entrants (subclass 482 and previously subclass 457) are another significant contributor to net migration. Their contribution generally rises when the labour market is strong. For example, skilled temporary entrants contributed 32,520 to net migration in 2012 (that is, 13.5% of total net migration).

Skilled temporary entrant contribution falls when the labour market is weak. For example, skilled temporary entrants’ contribution to net migration fell to 8,810 in 2014 when the unemployment rate increased to 6%.

The silly changes to skilled temporary entry that Dutton made in 2017-18 also constrained the contribution of skilled temporary entry to net migration. While those changes are yet to be completely unwound, as agreed at the Jobs and Skills Summit, the strong labour market in 2022 will mean skilled temporary entry contribution to net migration will rise.

To the end of October 2022, 53,958 offshore skilled temporary entry visas had been granted. This is likely to rise to over 60,000 for the full year. Traditionally, around 70% of skilled temporary entrants meet the 12-out-of-16-month rule to be counted in net migration. That suggests skilled temporary entrants may contribute around 40,000 to net migration in 2022.

Given the strength of the labour market in 2022, that should not surprise.

Working holidaymakers

From 2014, working holidaymakers who extended their stay after arrival contributed around 25,000 per annum to net migration.

To the end of September 2022, DHA had granted 106,924 first working holidaymaker or work and holidaymaker visas. Most of these would have been to people who were offshore. Assuming by end of 2022 DHA had granted 120,000 such visas to people who are offshore – and they arrive by the end of December 2022 – what portion of these might be counted for net migration?

Traditionally around 20% of these visa holders secure a second visa and hence meet the 12-out-of-16-month test of stay in Australia — often depending on the strength of the labour market. That would suggest around 24,000 working holidaymakers will contribute to net migration in 2022.

Other temporary entrants

This grouping includes people departing Australia on temporary graduate visas and bridging visas as well as arrivals on other temporary visas including the Pacific Australia Labour Mobility (P.A.L.M.) scheme.

Traditionally, this category has contributed around negative 15,000 per annum to net migration. With the very strong labour market, it is likely departures will not have been as large as usual in this grouping, even though DHA has reduced the bridging visa backlog significantly in recent months. Most of that reduction would have been moved onto other visas.

Growth of the P.A.L.M. scheme will also reduce the negative contribution of this grouping. I estimate it would be unlikely this grouping will contribute more than negative 10,000 in 2022.

New Zealand citizens

Around a decade ago, New Zealand citizens contributed significantly to net migration. For example, they contributed 27,170 in 2010, 43,400 in 2011, 42,050 in 2012 and 22,410 in 2013. Since then, New Zealand citizens have consistently contributed less than 10,000 per annum to net migration. This was predominantly the function of a much stronger labour market in New Zealand compared to Australia, as discussed here.

Given the strong Australian labour market in 2022, we can expect a larger net migration contribution by New Zealand citizens. It would be surprising, however, if this exceeded 10,000 as New Zealand’s labour market was also strong.

Australian citizens

Prior to the pandemic, Australian citizens consistently made a negative contribution to net migration. (Lots of Australians taking up attractive job opportunities overseas or going back to the country from which they originally migrated.)

The net outflow of Australian citizens peaked in 2014 at 22,410 and in 2015 at 26,400 before gradually declining as Australia’s labour market improved. From 2019 to 2021, there was a substantial net inflow of Australian citizens, peaking at 24,270 in 2020.

This reversed significantly in 2022. The net movement of Australian citizens (that is, arrivals minus departures) in 2022 was an astonishing negative 527,690. This offset the positive net movement of Australian citizens in 2020 of 741,640 — taking place predominantly in the first three months of 2020.

In most years prior to the pandemic, the annual net movement of Australian citizens averaged around negative 30,000 to 60,000.

The vast bulk of the negative 527,690 – particularly the large outflow in December 2022 of negative 334,580 – will be Australians taking holidays overseas after being prevented from doing so when international borders were closed.

But a substantial portion of the remaining 193,110 will be Australians who are overseas for more than 12 months out of 16 and will thus make a negative contribution to net migration. I expect the negative contribution to net migration from Australian citizens may be well over 50,000 — the largest negative contribution to net migration from Australian citizens in our history.

What's next if net migration forecasts are too low? 

From the above, I expect net migration in 2022 (and most likely in 2022-23) to be over 300,000 — and possibly well over.

That in itself is not a problem as long as the labour market remains strong in 2023-24. But Treasury is forecasting a sharp weakening of the labour market in that year, along with weaker economic growth globally.

If that were to happen, there would be a large number of temporary entrants and newly arrived migrants who may struggle to keep a job (many will be forced into taking any job at any rate of pay) as they have no access to social support.

In that context, a very large net migration figure in 2022 and 2022-23 will become a political hot potato.

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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