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Australia is about to enter a new and ugly blame game over the price shocks that are hurting households and dominating the dispute over this week’s federal budget. According to Opposition Leader Peter Dutton, those primarily to blame for this soaring inflation just landed at an airport near you. That’s right: the migrants did it.
This is the attack line from Dutton may turn arguments over the budget into a dirty campaign that stokes fears about newcomers and creates an almighty scare about a big Australia.
The Coalition expected 1.3 million migrants over five years in its budget in April 2019, when Peter Dutton was home affairs minister.Credit: Alex Ellinghausen
So it is important right now, before the fears go from ignition to explosion, to examine the budget forecasts and challenge the claims about the pressure on inflation. One key point is clear: there is a very good chance the net intake will be lower than everyone thinks.
Treasury officials predict 400,000 in net overseas migration this financial year and 315,000 migrants next year, as revealed by this masthead and others on April 28. The new figures on budget night were for subsequent years: 260,000 each year.
That means 1.5 million migrants over five years. Dutton launched an attack on this number in his first question in the first question time after the budget, then kept it up on Thursday. He placed his bets in a calculated political move. No matter what the logic about these numbers, his rhetoric taps into deep concerns about population growth and a changing society.
But this is not the first time net overseas migration has been high. The Coalition expected 1.3 million migrants over five years in its budget in April 2019, when Dutton was home affairs minister. That budget even had a slightly bigger forecast for the long term: 268,000 and 264,000 a year.
That influx did not happen, of course, because the pandemic arrived and Australia started exporting people for a change – 89,000 of them in 2021. This should bury the Big Australia furphy because the Labor population forecast is for 27 million people by June 2024. The Coalition forecast in the April 2019 budget was to get to that size in 2022. It assumed the same “big Australia” two years sooner.
During the pandemic Australia started exporting people for a change – 89,000 of them in 2021.Credit: Bloomberg
To be blunt, there is no evidence the last government had a different plan during its nine years in power. Dutton cut the number of permanent migrants, but this was not the same as cutting total migration or stopping population growth – because people came in on short-term visas and created a permanent underclass of temporary migrants. That is the very problem identified in the review of the visa system led by Martin Parkinson, former secretary of the Department of Prime Minister and Cabinet.
(You do not have to be a permanent resident to be counted in the population numbers: the count includes huge numbers of foreign students, working travellers, skilled foreign workers and others who have been here for more than nine months or so.)
Abul Rizvi, a former deputy secretary in the Department of Immigration, says the record net migration this year was inevitable under the previous government’s policies during the pandemic – including rules that made it easier for foreign students to work.
“This was going to happen whoever was in power because nobody would have had the guts to reverse the COVID-era policies during a massive labour shortage,” he says. “For anyone to pretend otherwise is just ridiculous.” He adds that net migration helps deliver this year’s $4.2 billion surplus.
It is too late to make a big difference to the 400,000 who are due to arrive in the year to June, but two changes will reduce the migration flow over time. The first is that foreign students will only be allowed to work 24 hours a week from July, restoring rules that were waived during the pandemic. The second is an increase in the income benchmark for temporary workers from $53,900 to $70,000 from July. The effect is to remove incentives for these migrants to arrive.
Will these arrivals fuel inflation? This is the central assertion from Dutton which may whip up a populist storm that turns migrants into scapegoats.
To be fair to Dutton, economists are watching the population numbers for the impact on aggregate demand. “I do worry about that population surge and the inflationary implications,” economist Warren Hogan told Sky News on Tuesday night. But these were measured comments next to the political assault from the opposition.
One of the best authorities on population policy in this country, Professor of Demography Peter McDonald of the University of Melbourne and the Australian National University, advises cautious with the inflation claim. “The main point is that the effect would be quite marginal because migrants in one year are a tiny proportion of the population,” he says.
Why is that? McDonald points out that most migrants are not big spenders – the students and working travellers cannot afford to be – and research has shown they cram into share accommodation. The government says half of the 400,000 migrants this year are students.
Labor is exposed on another part of this debate: housing. The budget was mostly silent on infrastructure and only offered a few tax changes on housing, while the $10 billion housing fund is stalled in the Senate. The most common talking point in this space from Labor ministers – a “housing accord” to build one million homes – does not even start until 2024. The intentions are good but the progress is slow.
So it may be Dutton knows what he is doing. He will hit a nerve when he complains about migration and housing.
On inflation, however, the key point from McDonald needs repeating. The impact would be marginal.
What happens over the next five years is likely to be very different to the alarming rhetoric this week. The 1.5 million figure is a forecast, not a target, and it does not factor in the changes to the income benchmark or the working hours rule. That means the policy changes will probably lead to a lower actual intake.
Rizvi names four reasons to expect the final numbers to be lower over the next few years. First, those policy changes. Second, a weakening labour market, which means lower demand for migrants. Third, the decisions expected later this year to act on Parkinson’s review. Fourth, the spending in the budget to fix visa processing and compliance.
Labor is being pulled in two directions at once. It needs the migrant intake to sustain economic growth and prevent a recession, but it needs to keep the number in check to keep faith with Australians who worry that population growth is too high. It could revise the 1.5 million forecast downward over time.
Dutton, meanwhile, is taking the low road on migration. He appears to offer fear and anxiety in the hope it will give him a political recovery. But Australians should handle Dutton’s dynamite with care – and a few facts might help limit the explosion.
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