Will increased migration make Australia wealthier?

17 January 2006


Increasing skilled immigration will create a more powerful economy in Australia and make people richer on average, the Government's leading agency for economic analysis says. In a report entitled Economic Impacts of Migration and Population Growth, the Productivity Commission says much of the new wealth will be received by the migrants themselves.

The report comes after the Australian Government increased the immigration intake by 20,000 this financial year. This will take the non-humanitarian tally to about 140,000, the highest in at least 40 years. The Premier, Morris Iemma, has quietly dropped the anti-immigration stance of the former premier Bob Carr, including his refrain that "Sydney is full".

The immigration figures mask a steep rise in the number of temporary business immigrants; in 2003-4 there were 360,000 of them, double the number of eight years earlier. Sydney has received the bulk of temporary migrants but has also suffered most from the loss of educated young workers who go overseas.

The migrant intake has more than doubled since 1999-2000.

Skilled migrants have risen from 29 per cent of the program to 70 per cent this financial year.

The report shows the likely effects over 20 years of the Government increasing the current intake of skilled migrants by 50 per cent. In the commission's modelling, the economy would be 3.5 per cent higher than it otherwise would by 2024-5, and average incomes would be $335 higher.

Higher numbers of skilled migrants would add competition to the professional jobs market, leading to professional wages falling more than 5 per cent. But tradespeople, labourers, transport workers and production workers could see wages increase slightly, as new migrants add demand in areas such as housing construction.

The economy would be boosted by higher employment and higher consumption, offset by a temporary fall in the terms of trade (or ratio of export prices to import prices). The report concludes that immigration has a "neutral to mildly positive" effect on overall living standards. "It tells you that migration policy is not an economic lever and you wouldn't use it as such," Professor Sloan said.

Britain and China were by far the top two sources of migrants in 2004, followed by New Zealand and India.