Treasury forecasting huge departures increase to drive down net migration

After repeatedly missing its net migration forecasts in recent years by a very wide margin, in December 2024, Treasury’s Centre for Population provided an update of its net migration forecast. But can this now be believed?

The key development is that net migration is forecast to fall to 257,400 in 2025-26 compared to Treasury’s belatedly updated forecast for 2024-25 of 341,700 (up between 50,000 and 130,000 from its original forecast).

For 2026-27, Treasury is forecasting net migration to fall to 224,100 — a net migration low not reached since former PM Tony Abbott drove up the unemployment rate to over 6% resulting in a massive exodus of Australian and New Zealand citizens. The forecast decline in net migration is to be driven largely by a huge increase in net migration departures. But will that be delivered?

(Data source: Centre for Population 2024 Population Statement)

The Treasury forecast over the next few years involves a decline in arrivals and an even larger increase in departures. To assess the plausibility of this, there is merit in comparing the most recent forecast with the outcome for 2018-19 which was the last full financial year prior to the pandemic. As the Prime Minister has said, he wants net migration to return to pre-pandemic levels.

Net migration in 2018-19 was 239,600 with 537,840 arrivals. That means Treasury is assuming net migration arrivals in future will average some 50,000 to 60,000 higher than prior to the pandemic. Departures in 2018-19 were 298,400 which means Treasury is assuming net migration departures will average around 70,000 higher than pre-pandemic. As a general rule, a high level of departures is only possible with a very weak labour market and highly controversial policy tightening.

The unemployment rate throughout 2018-19 was over 5% (currently around 4%) while the participation rate was under 66% (currently around 67%). But unemployment had fallen from the peak of over 6% under Abbott and so net migration had increased.

Australian Treasury increases net migration forecast

Australia's Treasury increases 2024-2025 net migration forecast by 80,000

Student contribution to net migration

The student contribution to net migration over the last 20 years has averaged between 40% and 50%. It is by far the largest contributor to net migration. In the 5-6 years prior to the pandemic, the net migration contribution of students and the stock of students in Australia steadily increased as policy remained loose. Not surprisingly, education providers in all sectors took advantage of that.

Student arrivals in 2018-19 were 172,930 and departures were 60,220, giving a student contribution to net migration in 2018-19 of 112,700. That drove up the stock of students to a new record of over 630,000 (plus a substantial onshore backlog on bridging visas) in September 2019 with the stock of temporary graduates approaching 100,000. Only COVID put a stop to that relentless and largely unmanaged rise and delayed the need for policy tightening (indeed, COVID gave the Coalition the excuse to step on the student visa accelerator which has given us the current predicament).

While student visa policy settings are much tighter now than they were in 2018-19, the industry’s student tuition revenue expectations are also much higher. Many in the industry will struggle to survive without strong ongoing growth in student arrivals, especially those who are more in the business of selling work visas than selling education. For these providers, the Coalition’s decision to introduce unrestricted work rights for students was a marketing dream as was the Labor Government’s delay in withdrawing that.

Treasury has assumed long-term student arrivals will stabilise at around 25,000 higher than in 2018-19 after falling to 184,500 in 2024-25 and then increasing to 198,900 in 2025-26. That level of net migration student arrivals will be well below the student net migration arrivals that would have resulted if the Government’s higher education and vocational education and training (VET) commencement cap of 270,000 had been delivered.

The industry will test the Government’s resolve to keep student arrivals at these lower levels. With the demise of the student capping legislation, the Government does not currently have an effective policy tool to control student visa numbers. It is relying mainly on provider-level risk ratings to subjectively control refusal rates — an inadequate policy tool. The new Ministerial Direction 111 does not control student numbers.

This situation will make the Treasury forecast of stabilising student arrivals at around 25,000 per annum higher than in 2018-19, but well below the level in 2022-23, a very difficult challenge. Much will depend on the offshore student application and visa grant rate.

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Less plausible is the forecast that student departures will rise to 115,000 per annum, some 55,000 higher than in 2018-19 and around 85,000 higher than in 2023-24.

While the Department of Home Affairs (DHA) is making efforts to increase student and temporary graduate departures, and a large number of students (and temporary graduates) will from 2025-26 hit a visa brick wall, such a large increase in overall departures compared to both recent years and pre-pandemic is unlikely without a very significant weakening of the labour market as well as further policy tightening.

The difficulties of driving up student departures are highlighted by the current very large backlog of onshore student applications (over 100,000); the high primary refusal rate based on subjective criteria; the rapidly rising appeal rate to the Administrative Review Tribunal (A.R.T.) (see Chart 1); and the rising trend of students applying for asylum.

Achieving Treasury’s student net migration forecast will involve a great deal of pain for the industry, students and the Government, highlighting the mistake of letting student numbers and student quality get out of hand. Despite that, Treasury’s student net migration forecast would mean the stock of students will continue to grow, albeit at a slower rate than in 2018-19.

Key features of the other parts of Treasury’s net migration forecast include:

A decline in the net migration contribution of NZ citizens from 37,000 in 2023-24 to 16,000 in 2026-27. This could only be realised with a very sharp weakening of Australia’s labour market relative to that of NZ. There is little evidence to support that at this time, noting that the policy change from 1 July 2023 to provide a direct pathway to Australian citizenship to NZ citizens has structurally increased the NZ citizen contribution to net migration.
A rise in net migration of Australian citizens from negative 26,000 in 2023-24 to negative 13,500 in 2026-27. This could only be explained by a much stronger Australian labour market, contrary to the assumption that would underlie the NZ citizen forecast.
Net migration contribution of permanent visa holders is forecast to remain stable at around 70,000, with a small rise in permanent arrivals offset by a similar rise in departures — the latter would again assume a weaker labour market. The 70,000 forecast is likely to be on the low side as the permanent migration program remains close to a record high of 188,000 (plus the knock-on effect of the NZ citizen policy change) and the humanitarian program at 20,000. At some stage, the Government will also have to deal with the bourgeoning partner visa backlog and not administratively (and illegally) limit processing these visas. That will also limit Opposition Leader Peter Dutton’s ability to deliver his reduction in the migration program.

The bravest part of Treasury’s forecast is a major decline in net migration of all other temporary visa holders from 196,000 in 2023-24 to 66,000 in 2026-27. Such a large decline in the net migration contribution of all other temporary visa holders would require both major policy tightening as well as a significant weakening of the labour market. The decline would involve a massive increase in departures of other temporary entrants.

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.

It is unfortunate that Treasury does not publish further details of this part of its forecast as that would inform us which categories of temporary entrants the Government expects to depart in much larger numbers.

For example, at present there are:

Over 220,000 temporary graduates in Australia, many of whom have paid very large tuition fees for a qualification that they thought would give them a pathway to permanent residence. Many will now be seeking nomination by a state government or employer sponsorship. But places are limited compared to demand, even for those who secure skilled jobs.
A record 213,000 working holidaymakers who have the option of remaining in Australia for at least three years before they must secure another type of visa. Tightening policy in this space would draw a backlash from the National Party, as well as the Agriculture and Tourism industries.
Almost 190,000 skilled temporary entrants (below the record 200,000 in early 2014 but that record may be broken in 2025 if the labour market remains strong). This group of temporary entrants has the strongest pathway to permanent residence.
A record 120,000 asylum seekers, a number that will keep on growing after the initial boom in these under Peter Dutton.
Visitors extending stay which boomed prior to and through the pandemic but may now temper due to policy tightening.

None of the above groups are currently showing an intention to depart Australia in the large numbers Treasury is forecasting, although they will need to make some difficult decisions over the next 12-18 months as they hit a visa brick wall.

While net migration in 2025-26 is highly likely to fall compared to 2024-25, there are inconsistencies in the Treasury forecast as well as assumptions about departure rates that make it unlikely net migration will fall as far as Treasury has forecast without a major weakening of the labour market as well as further painful policy tightening.

This once again highlights the importance of not letting net migration, particularly overseas students, get out of control. There remains an urgent need for a policy tool that both controls student numbers as well as academic capability.

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.