Current migrant arrivals are “bringing a welcome fiscal boost” to offset the pressures of Australia’s ageing population, Treasury and Department of Home Affairs modelling has found.
The report, released this week, found that Australia’s labour force participation rate saw a decline from the early 2010s to 2016 – the first time in three decades that this has occurred.
Noting that this decline coincided with Baby Boomers reaching retirement age, the report pointed to evidence that migrants and especially skilled migrants have “helped curb the ageing of the population by boosting the labour force”.
“Without the contribution from migrants, all else being equal, Australia’s participation rate would be lower than at present,” the report said.
However, the migrant-fuelled 1.6 per cent increase in workforce participation won’t be enough to offset the overall effect of population ageing, although it does give the economy breathing room to adjust, the report found.
“New migrants normally have several decades in Australia before they reach retirement age,” the report explained, while observing that migrants generally arrive at a point when their taxable income is at its highest level and their reliance on public services like health, education and aged care is at its nadir.
“This means that current arrivals are bringing a welcome fiscal boost at a time when Australia is facing heightened fiscal pressures due to the ageing of the population.”
While the report noted that humanitarian migrants incur a $2.7 billion net negative fiscal impact over 50 years due to resettlement costs and general lower wages, it found that the overall fiscal benefit of the Permanent Migration Program, the Humanitarian Program and the 457 temporary skilled visa program would come to $9.7 billion over 50 years.
However, respective secretaries to the Treasury and Department of Home Affairs, John A. Fraser and Michael Pezzullo also acknowledged the infrastructure requirements migration demands.
“A growing population heightens existing pressure on infrastructure, housing, transport networks and our environment — especially in major cities — and the distribution of population growth will be a key factor in shaping the future of regional centres,” they said.
“Policy makers will need to think carefully about the steps that can be taken now to ensure Australia can continue to reap the benefits of migration and population growth.”
The Treasury and Department of Home Affairs modelling is the latest addition to the immigration debate, in which the Property Council, the Housing Industry Association, the Reserve Bank of Australia and ANU researchers have emphasised the benefits of a broader tax base, while the Grattan Institute has reminded politicians and policy-makers of the infrastructure reality posed by high levels of immigration.
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