By Peter McDonald
Last week, the Australian published a story saying net-overseas migration would reach 650,000 over the two financial years, 2022-23 and 2023-24.
As the story included comments from Treasurer Jim Chalmers and Treasury Secretary Steven Kennedy, we can assume these numbers will appear in the population statement accompanying the May budget.
The new numbers have attracted attention in the media, especially in relation to the effects of large-scale migration on the labour and housing markets.
The dramatic turnaround in the level of net-overseas migration is indicated in the following table:
What explains this massive turnaround?
Net-overseas migration is determined by the number of migrant arrivals each year versus migrant departures. If more migrants arrive than leave Australia, this gives us a positive net migration.
Due to border closures during the pandemic, Australia had an extremely low level of net migration in the period from September 2020-21.
However, the rebound in migration within one year was clearly much greater than had been expected by officials in Canberra in preparing the 2022-23 federal budget statement, which was published last year.
The following table compares the net migration from September 2021-22 (the most recent year for which data are available) with the calendar year 2019 (the last year not affected by the pandemic).
The table shows the high level of net migration in 2021-22 was due more to people not leaving Australia than to people arriving.
Very little of the increase in net migration across these two years was due to the granting of permanent resident visas to people living offshore or to the movements of Australian and New Zealand citizens.
Rather, the increase is explained by changes in the movements of temporary residents, such as international students, working holidaymakers and other temporary or bridging visa holders.
The changes in the numbers of temporary residents in Australia provided by the Department of Home Affairs indicate how net migration may have changed by the main temporary visa types. These statistics are shown in the following table:
The biggest reason for the higher number of migrant arrivals over migrant departures since 2021 is changes in the movements of international students and working holidaymakers.
The preceding table shows that, from September 2019-21, the number of students and working holidaymakers in Australia fell by 421,000 due to the pandemic. But this number rebounded by 368,000 from September 2021 to February 2023.
This means that, in the most recent year, large numbers of students and working holidaymakers arrived, but very few left. The speed of the increase in these arrivals has been much greater than policymakers had envisaged.
Many temporary residents would also normally have been expected to leave Australia by September 2022, but they did not do so.
This includes many people on bridging visas, which reached a record number of 369,000 in September 2022. A bridging visa is provided to people who are in Australia awaiting the outcome of another visa application.
This number included a huge backlog of applications for permanent skilled visas and many people (50,000 or more) who arrived by air on tourist visas and then applied for asylum in Australia. Almost all these asylum applications are rejected, but few have been deported.
Also, during the pandemic, the Morrison government extended eligibility for a temporary employment visa (visa subclass 408) to people in Australia whose temporary visas were due to expire. This enabled many people to remain in Australia when, otherwise, they would have left.
Finally, there has also been a longer-term increase in the number of people on graduate visas due to a policy change in 2011, as well as other recent changes made by the Albanese government.
A temporary surge, then return to normal
These data tell us that the recent increase in net-overseas migration has been due to policy changes that enabled people to remain in Australia rather than policy changes that enabled people to arrive.
This continued in February of this year with the Albanese government allocating extra resources to help clear the backlog of people on bridging visas. This has caused a significant decrease in the numbers of people on bridging visas, many of whom have been granted permanent residence.
The very unusual movements during the pandemic have produced a temporary surge in net migration, which we can expect to last for two or three years. After this, net migration should return to pre-pandemic levels as the number of migrant departures ticks upwards again.
A similar situation has occurred in Canada. In 2022, net migration exceeded one million people – a higher proportional increase than has occurred in Australia.
The impact on the labour force and housing
The impacts of this temporary surge in net migration on the labour force and housing are complex and cannot be interpreted in the simplistic terms now evident in much of the media.
The high level of net migration is largely due to people remaining in Australia instead of leaving. Almost all of these people were already working in Australia and were already housed.
Furthermore, students are often housed in student accommodation or live in extremely crowded circumstances, while working holiday makers often live in backpacker hostels.
But there is no denying the rental housing market in Australia is under considerable pressure due in large measure to the conversion of long-term rentals to short-term. Migration adds to this pressure.