Politics Analysis

Why Canada has cut permanent migration and Australia shouldn’t

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Canadian Prime Minister Justin Trudeau announced the reduction in permanent resident levels (Screenshot via YouTube)

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.

AFTER A NUMBER of years of running very large permanent and temporary migration programs, especially as a response to COVID, the Canadian Government has announced it will severely cut back on both. Given the similarities between the two countries, and similarities in the debate in both countries about the links between immigration levels and pressures on housing/infrastructure/service delivery, should Australia do the same?

Canada’s population and immigration policy

During COVID, Canada’s population growth fell to 0.3% in 2020 and then boomed to an extraordinary 3.1% in 2023, driven by 471,817 permanent residents plus a net increase in temporary residents (mainly students and temporary workers) of 820,766. That enabled the Canadian population to increase to over 41 million.

Like Australia’s Coalition Government, the Canadian Government stomped on the student visa accelerator at the end of COVID. Like Australia’s Labor Government, the Canadian Government was too slow to wind this back.

Canada’s population growth rate is projected to fall to 1.9% in 2024 and negative 0.2% in both 2025 and 2026. This is to be driven by temporary residents (students and temporary workers) in Canada falling from a net increase of 820,766 in 2023 to a projected net decrease in 2025 of 445,901 and a net decrease in 2026 of 445,622. A phenomenal turnaround.

A government deliberately aiming for negative population growth is unprecedented (many nations have negative population growth but not due to a deliberate policy).

For context, note that natural increase in Canada is very low at around 15,000 in 2022-23 and falling due to an aged population (more aged than Australia’s) and a record low fertility rate of 1.26 births per woman in 2023. Winding back net migration too far and for too long in Canada would mean deaths exceeding births within the next five years and population ageing accelerating.

By comparison, natural increase in Australia is still above 100,000 per annum with a fertility rate of 1.5 births per woman in 2023. Australia has a younger population with a median age of 38 compared to Canada’s which is over 40 and likely to now rise more quickly. The over-65 population in Canada (around 18%) is larger and growing faster than in Australia (around 16%).

Canada intends to shrink its temporary resident population by limiting new arrivals of both students (already down 43% in the first nine months of 2024) and temporary workers. But it is mainly relying on a significant increase in departures of students and temporary workers together with some transitioning to permanent residence. Canada’s objective is to reduce the number of temporary residents (students and temporary workers) in Canada from 2.96 million in 2024 (7.1% of the population to 2.07 million in 2026 — 5% of the population).

Reducing the temporary resident population is also a stated objective of Australia’s Labor Government but on that it has gone backwards with the temporary resident population (not including visitors) continuing to hit new records.

The composition of Canada’s temporary resident population is quite different to Australia’s. The number of overseas students in Canada in 2023 was around the same as in Australia yet Canada moved much earlier to limit student numbers aggressively using caps that were determined by each province, whereas Australia has to date used tightened visa processing policies.

Australia’s student caps have been set at much higher levels and are yet to take effect. Unlike Canada, if the Australian student caps as announced are hit, student and former student numbers in Australia will continue to rise.

The number of temporary workers in Canada is much larger at over 900,000 compared to around 480,000 in Australia when skilled temporary entrants (around 170,000), temporary graduates (over 230,000), Pacific Australia Labour Mobility (P.A.L.M.) workers (30,000) and COVID visa holders (around 50,000) are combined. Working holidaymakers are not included in either set of figures.

Another big difference between the two nations is the over 700,000 New Zealand citizens who are also in Australia on temporary visas. Canada and the U.S. do not have a program similar to the Trans-Tasman Travel Agreement. Canada generally has a large net loss of people to the U.S. while Australia generally has a large net gain of people from NZ.

In addition to a major cutback in temporary residents, Canada is proposing a smaller permanent intake which is projected to fall from 485,000 in 2024 to 395,000 in 2025, 380,000 in 2026 and 365,000 in 2027. The reduction is to be delivered through proportionate cuts to the economic, family reunification and humanitarian streams. Canada has more scope to cut its family reunification stream because it has a larger parent category which can be cut more readily and thus does not need to cut the partner category (something it has never done).

Another crucial factor in Canada’s decision to reduce net migration into negative territory is its labour market. Unemployment in Canada has increased from 5% at the start of 2023 to currently 6.5%, with its participation rate falling from 65.6% in early 2023 to currently 64.9%. This will help Canada to increase student and temporary worker departures. By comparison, Australia’s unemployment rate has remained relatively low at 4.1% with a participation rate at a record high 67.2%.

The Governor of the Canadian Central Bank has warned that the dramatic reduction of net migration driving Canada into negative population growth will have a major impact on economic growth. There will be even more pressure to implement stimulatory monetary and fiscal policies as is the case in China and Japan which also have negative population growth and more rapidly ageing populations.

The situation in Canada (and to a slightly lesser degree in Australia) highlights the dangers of massive swings in the level of net migration and the importance of managing this carefully.

Should Australia do the same?

Australia’s two major parties have announced their respective immigration policies although with limited detail on how they will deliver their proposed reductions to net migration.

The Labor Government has indicated it will maintain a permanent migration program of 185,000 per annum plus 3,000 places in the new Pacific Engagement Visa (PEV) and 20,000 places in the Humanitarian Program. All up, 208,000 permanent residence visas per annum.

Together with using caps on student inflows, the Labor Government forecasts net migration falling from 520,000 in 2022-23 to 395,000 in 2023-24 (a forecast it clearly missed by a long way), 260,000 in 2024-25 (a forecast it is highly likely to miss again by a very long way) and eventually falling to 235,000. Treasury has developed a very bad habit of substantially overestimating the fall in net migration.

The Coalition has announced it would reduce the Humanitarian Program to 13,750 which is possible given this is largely at the discretion of the Government.

It has also announced it would reduce the permanent migration program to 140,000 with one-third of places in the family stream and two-thirds in the skill stream. This is where it will run into problems.

First, there is a large and booming backlog of partner visa applications that must be dealt with. The Migration Act requires these to be managed on a demand-driven basis. The Labor Government is acting in contravention of the Act by allowing such a huge backlog to build up while limiting the number of partner places. Cutting the family stream, which would require either reducing partner places or at best holding these steady, as proposed by the Coalition, would be making a bad situation worse. Whoever is in government will need to increase the number of partner visa places.  

Second, the skill stream is currently supplying much-needed skilled migrants into a very strong labour market where there are major shortages in health and aged care, teaching, construction and energy. Both major parties are looking at ways to increase the migration of traditional construction workers. Over 60% of the skill stream is delivered via temporary entrants (many would be former students) who already hold skilled jobs in Australia. Cutting the skill stream would be forcing these people to leave Australia when we have a very strong labour market.

While Australia must reduce net migration to more sustainable levels and reduce growth in the number of people in immigration limbo, cutting the permanent migration program as proposed by the Coalition would be both an illegal and foolhardy way to do it.

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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