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A new migration system

Last Thursday, the government released its much anticipated review of the migration system. This comes as the RBA raised rates again yesterday, flagging that stronger than expected population growth could have “unanticipated or more pervasive effects” on the economy.

The review highlighted that the migration system needs clear evidence-based strategies that consider the needs of businesses and Australian workers while protecting the rights of migrants.

One of the review’s biggest criticisms was that the current system lacks a holistic view of migration. The current system focuses on program numbers but does not provide clear pathways to permanent residence. This approach ignores the complexity of temporary migration, despite the stock of temporary migrants nearly doubling over the last 15 years. Over time, the number of temporary migrants per permanent program outcome has risen steadily (see Chart 1), reinforcing the need to consider both streams holistically.

The lack of planning for temporary migrants has created a class of “permanently temporary” workers without a certain pathway to permanent residence. These migrants are unable to plan a life in Australia, limiting our ability to attract the best and brightest from around the globe.

As a result, the review emphasises that the immigration system will need to create a clear pathway to permanent residency.

Chart 1: The stock of temporary migrants per permanent migrant arrival (people)

Source: Department of Home Affairs

The review also highlighted the complexity of the current system, the need for simplification and better targeting of those who receive visas.

A suggested measure likely to be welcomed by some employers is the removal of labour market testing. Instead, the system would rely on the expertise of Jobs and Skills Australia and the advice of the Ministerial Advisory Council on Skilled Migration. In addition, less reliance on rigid occupation lists will be required to keep the data contemporary and reflective of actual labour market needs.

Australia is facing growing international competition for skilled migrants. The review agreed, noting that Australia will need to sharpen our permanent skilled migration settings to attract migrants able to meet future needs, maximise economic outcomes and capitalise on opportunities for growth in a changing economy. It also pointed out that the current system is not supporting the best and brightest international students to stay in Australia and reach their potential in our labour market.

Looking forward we can expect changes to the migration system because of the review but when, and exactly what, the changes will be is uncertain. That said, the government has already indicated they will increase the temporary skilled migration income threshold (TSMIT) to $70,000 from July 1. The current TSMIT is $53,900 and the change is expected to reduce the number foreign hospitality and retail workers available to businesses, with around 21,000 temporary skilled migrants earning less than $70,000. While this may hurt some businesses or force them to pass on additional costs to consumers, it is an important update to keep the TSMIT current – around 90% of full-time jobs in Australia are now paid more than the current TSMIT.

On Friday the national cabinet discussed updated net overseas migration (NOM) forecasts which suggested that NOM would be 400,000 in FY23 and 315,000 in FY24, compared to NOM which averaged around 216,000 a year over the decade to FY19. Closed borders saw below average NOM from FY20 to FY22, so the current year and next year are seeing a rebound. While this is good news in filling our labour market needs, it is also creating some challenges in rental markets.
This blog was co-authored by Blair Chapman, PhD.