This week has been tough for many Australians. At the time of writing, all but two states had gone into some form of pre-emptive or outbreak-driven COVID-19 lockdown. Against this background, the federal government launched its Intergenerational Report - a five-yearly document that takes a long-term vision for Australia's future.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The Treasurer's speech contained all the platitudes that usually accompany a document of this kind, making references to being "forward-thinking" and to "the three Ps" - productivity, participation and population. But it also contained some words of caution. Our population is growing more slowly and ageing faster; growth is assured, but probably will be slower than previously anticipated; and our ageing population will put significant pressures on future budgets.
Though it might not be clear at present, migration has been crucial to Australia's economy and demography. Sixty per cent of our population growth over the last decade has been through migration. The IGR projects that by 2060-61, it will be 74 per cent.
The report confirmed what most of us already knew - the enduring legacy of this pandemic for Australia will be slower population growth. We will fall well short of the 2015 IGR's projection of 40 million people by 2054-55. This is the first time there has been a downward revision to the IGR's population growth estimates and this will have a lasting impact on our economy.
It has flow-on effects for our capacity to care for our ageing population. Our dependency ratio (the ratio of working-age population to those over 65) is set to fall from 4.0 in 2019-20 to 2.7 in 2061.
Australia's biggest future areas of spending growth will be in health and aged care. Our falling dependency ratio will mean that fewer people will be around to bear the financial costs of an ageing population. This in turn means taxes will have to rise, or future generations will have to take on more of the burden of national debt. But with the government's cap on the ratio of taxes to GDP of 23.9 per cent, younger generations will likely have to bear more of these expenditures in the future.
Migration has often been called upon to solve Australia's problems. Migrants are younger, which helps to ease ageing demographic pressures, and they have skills that Australia needs. They also contribute more to tax revenues than they take out in benefits. The IGR estimates that the net fiscal impact from migration is positive, with skilled primary migrants in particular netting the government $319,000 over their lifetime.
Migrants consume goods and services, and in doing so add to the level of economic activity in the economy to the tune of $4.2 million over the course of the migrant's lifetime (in net present value terms).
We can't continue to rely on the policies that got us through the first 12 months of the pandemic.
The question remains: how do we return to pre-pandemic levels of migration, as forecast in the federal budget and confirmed in the IGR, with our borders shut? (The government has committed to 235,000 net overseas migration arrivals in 2024-25. A significant increase from the forecast -77,400 in 2021-22.)
Australia's pandemic border policy has been one of the harshest in the world. Early in the pandemic we stopped people from leaving the country without an exemption, put caps on the number of arrivals into the country and only took passengers who had tested negative to the virus. While in the beginning, when there wasn't much information about the virus, how it spread and whether there would be a vaccine, these restrictions seemed appropriate, almost 18 months and three billion vaccine doses later, this is less defensible.
Given the growing tensions between the states and the federal government over vaccines, border closures and quarantine arrangements, lockdowns seem like Australia's fait accompli, at least until we have greater vaccine supply. And even once a sufficient proportion of the Australian population has been vaccinated, Prime Minister Scott Morrison has indicated that opening up is not guaranteed.
Where does this leave our migration policy? From 2023-24, the previous reduction in the permanent intake cap from 190,000 to 160,000 will expire. This will mean that many more potential migrants will be able to become permanent residents. From 2024-25, budget assumptions have net overseas migration at 235,000 and the IGR projects this level into the future.
While other countries, economies and lives have been hit harder than ours, we can't continue to rely on the policies that got us through the first 12 months of the pandemic. Slower population growth through the pandemic has put us in a worse position demographically, economically and fiscally. A roadmap outlining our exit out of this pandemic is well overdue. The government should immediately commit to a timeline for opening our borders and release a plan for how we get there.
Australians have shown immense strength and fortitude during this crisis. We need to unite behind a common goal - opening ourselves up to the world again.
The Prime Minister's recent announcement goes some way towards showing us a roadmap out of this crisis. But with no clear targets or milestones, there's not much to hang one's hat on.
We need our leaders to chart a firm road to the other side, as they should in a crisis.
- Gabriela D'Souza is a senior economist with the Committee for Economic Development of Australia.
