Australia needs an ambitious migration target

26 Oct 2021 |

This opinion article by Australian Chamber of Commerce and Industry’s chief executive Andrew McKellar was first published in the Australian Financial Review on 26 October 2021

Before the pandemic, Australia’s migration rate had already fallen to just 95,000 arrivals in 2019-20, down from levels of 130,000 a decade earlier. Now, with COVID-19 closing our international border for more than 18 months, we’re down to a complete standstill.

The effects have crippled businesses across the country. Indeed, our recent Australian Chamber of Commerce and Industry (ACCI) – Westpac Industrial Trends Survey identified that businesses are facing the worst skill shortages in more than two decades, a direct result of the decline in overseas migration.

From construction workers to chefs, engineers to educators, and mechanics to managers, approximately one in three skilled occupations could be facing shortages if we don’t shift the dial on migration soon.

Despite this challenge, the pandemic has provided us with a unique opportunity to reset permanent skilled migration and to think about a smarter way to restore the intake of skilled migrants.

ACCI has been advocating for a return to a higher intake of skilled migrants of up to 200,000 a year by reopening our international borders as soon as it is safe to do so, and adopting ambitious targets to address the critical shortages across industry.

Yet predictably, hysteria has already set in.

The Australian Workers’ Union and other proponents of an Australian hermit kingdom are already rolling out the scare campaign.

Citing concerns that Australia is already too full, that we’re not investing in the skills of our own, and that migration is just an excuse to pay lower wages, their arguments against increasing the intake of skilled migrants could not be further from the truth.

The reality is that cutting migration does not restore lost wages growth or increase rates of employment for Australian workers.

Earlier this year, 51 of Australia’s top economists overwhelmingly rejected the myth that cuts to permanent migration can drive up wages. Rather, it was found that skilled migration boosts productivity, and that in turn is a crucial precondition to drive wages growth.

Dwindling productivity growth

Further, there’s no evidence to suggest a relationship between higher rates of skilled migration translates to higher unemployment rates for Australians. Targeting skilled migrants for sectors facing shortages doesn’t take jobs from Australians because they are filling previously unmet demand.

With our immigration rates plummeting, productivity growth dwindling, and wages stagnating the consensus is clear – skilled migration is one of the most effective methods to deliver substantial economic benefit to all Australians.

Equally, skilled migration is not a zero-sum game. Of course, we must also increase investment in our education and training systems to grow our skilled workforce to meet future demand.

For years, our vocational skills system has been plagued by poor design, underfunding and declining enrolments.

Take the number of apprenticeships that have spiralled down in the last decade for example. In 2012, the number of Australians beginning apprenticeships was almost 380,000. By 2020 that number had fallen to just 133,500, the lowest since 1997.

Increasing workplace productivity

The Boosting Apprenticeship Commencements program was an important step in turning this around, with more than 186,000 apprenticeships commenced in the year to March 2021, but there is still much more work to be done.

We need to invest in skills and training to deliver the foundations for a smarter Australian future. Increasing long-term funding for vocational education and training is essential to creating a skilled workforce for a modern economy and increasing workplace productivity.

A new funding program is needed to assist employers with hiring new apprentices or trainees beyond March 2022. The program should have a wage subsidy of 30 per cent for the first six months of a one-year traineeship and the first year of an apprenticeship, while maintaining existing wage subsidies to those businesses that have suffered the most from the pandemic.

However, the skill shortages we face are here and now. Our economic recovery is contingent on shortages being filled as soon as possible, not waiting to retrain local workers.

When we do reopen our borders, skilled migrants will not return in the numbers we need without a concerted effort from government to increase the intake.

This shouldn’t signal an open-slather border policy. Rather, a focused approach that considers the long-term economic potential of skilled migrants is required.

The federal government has set the permanent migration intake at 160,000 a year, in line with its policies before the pandemic, but we can’t just go back to the way things were before.

Skills shortages have already significantly worsened since then and are set to grow more rapidly as our economy begins to reopen. With demand for workers set to strain businesses further, we must “think bigger” to grow our productivity.

ACCI’s proposal to increase our skilled migrant intake up to 200,000 arrivals a year is exactly that, balancing the social and environmental objectives, while maximising our recovery to reach our economic potential.

Governments must make it easier to access the best in global talent and expertise. For business, this means access to a simple, affordable and responsive system that easily boosts the intake of skilled migrants.

With our international borders reopening to Australians soon, we must prepare to increase our skilled migrant intake. We cannot afford to lock ourselves up and throw away the key.

Andrew McKellar is chief executive of Australian Chamber of Commerce and Industry.

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