...politics at the expense of the economy ...you don't destroy...

...politics at the expense of the economy

...you don't destroy demand to solve a supply problem. You end up creating a new problem trying to solve an existing one.

...my take is that this policy would adversely impact the education primarily university sector, their revenues would plunge big time and they would be seeking Govt support for additional funding to close the gap, and we know the Fed Govt won't have the money, so they would be forced to increasing uni fees for domestic students in a very material way.

...and whoever is in Govt would have to increase temporary visas to bridge the worker shortage gaps, so decline in permanent migration which is all visible politics but temporary visa entrants still need a place to live and to rent.

...policy choices are often merely a wealth transfer from one group to another. But in this case, it is not just that...it could lead to a more permanent erosion in income contribution to the entire economy for years to come, similar to what Brexit did to the UK.

...but this is what most want, but totally oblivious to seeing the forest from the trees. Once again, failing to see the Macro- big picture.
Hard truths: What immigration cuts really mean for the economy

The latest migration debate has so far been framed in terms of its benefits, but little regard has been given to the costs of closing the door on skilled workers.
Michael ReadEconomics correspondent
Updated May 24, 2024 – 12.07pm,first published at 11.51am


The last time Australia’s immigration program was a front page political issue, more was better than less.
It was September 2022, and Anthony Albanese was facing calls from business and the Coalition to bring in more foreign workers to plug acute labour shortages caused by almost two years of closed borders.
Announcing a one-off increase in the permanent migration program to 195,000, from 160,000, Albanese hailed the vital role that the extra migrants would play in helping the economy recover from the pandemic.
The opposition welcomed the increase. Deputy Liberal leader Sussan Ley even asked why it wasn’t done earlier.

If a week is a long time in politics, 18 months is an eternity. The major parties are now debating who is better placed to dramatically cut migration, as community concern mounts over record levels of arrivals.

While the media quickly moved on from Treasurer Jim Chalmers’ third budget, coverage of Opposition Leader Peter Dutton’s budget reply speech has extended into a second week, due to his pledge to slash immigration.

The latest migration debate has so far been framed in terms of its benefits: cheaper housing, less traffic, fewer shonky education providers. But little regard has been given to the costs of closing the door on skilled workers and international students.

The economic effect of migration cuts would be wide-reaching, including lower economic growth, a deterioration in government finances, and more worker shortages.

The two pillars of Dutton’s plan are a cut to the permanent migration program and capping international student numbers, a policy also adopted by the Albanese government.


In the speech, Dutton proposed cutting the number of people receiving permanent residency from 185,000 to 140,000 for two years, or by 25 per cent. The permanent intake would then increase to 150,000 in year three, and 160,000 in year four.

One day later, amid criticism his plan would do little to cut population growth since most permanent residency grants were to people already living in Australia, Dutton went one step further, pledging to get net overseas migration (NOM) down to 160,000 by June 2025. (NOM is the net change in the population through migration among people planning to stay for at least 12 months.)
Outside the pandemic, that would be the lowest NOM rate since 2006. Experts say it cannot be achieved without substantially tightening the rules around Australia’s temporary migration program, which includes foreign students and demand-driven pathways for skills shortages and working holidaymakers.

Labor has also pledged to rein in migration, but its changes are far more modest. It expects to get NOM down to 260,000 by June 2025, largely through university-level caps on international student numbers, the details of which have yet to be announced.
Budget deficits to widen

One of the major economic consequences of Dutton’s proposal to cut permanent migration would be bigger deficits. Fewer migrants means less tax for both federal and state governments.
Grattan Institute migration expert Trent Wiltshire says every permanent skilled visa holder offers a fiscal dividend of $250,000 over their lifetime in Australia, since they pay more in tax than they consume in welfare and government services.
In the long term, it’s damaging and, quite frankly, it’s poor policy.
— Carlos Cacho, Jarden chief economist
“Permanent skilled workers come here when they are young, they are highly skilled, they generally have good labour market outcomes, earn high wages and, as a result, they contribute significantly to federal government budgets,” he tells AFR Weekend.


“There’s also emerging evidence that higher skilled migrants provide a productivity spillover to Australian workers as well, which also boost their income.”

The Grattan Institute estimates Dutton’s proposed cuts to the permanent migration program will cost the federal budget $34 billion in perpetuity due to lost taxes.

The economy will also be smaller than otherwise would have been the case. The $48 billion education sector – Australia’s fourth-largest export industry – will undoubtedly shrink.
“Exports don’t just include what international students pay to universities. It also includes all spending that international students do while they’re in Australia, like the rent they’re paying, the groceries they’re buying, and the furniture they’re filling the house with,” Jarden chief economist Carlos Cacho says.

Along with labour force participation and productivity growth, population is one of the “three-P’s” that determines how fast an economy can expand.

Cacho says lower immigration will pose a long-term challenge for the sustainability of the federal government’s budget, which was already projected to be in deficit for the next decade.

“You’re going to have fewer people paying income tax, corporate profits would be modestly lower, and you’ll also be getting obviously a little bit less GST, which flows through directly to the states,” Cacho says.
Shortages to worsen

The nation’s employers, who have for decades used foreign workers to plug skills gaps, will bear the brunt of any cuts to the migration program.


With Australia’s unemployment rate hovering near multi-decade lows, labour shortages are severe, with Jobs and Skills Australia estimating 36 per cent of occupations experienced worker shortages in 2023.

The most severe gaps were found in the health industry, where 82 per cent of occupations lacked workers. This included dentists, radiographers, optometrists and general practitioners.

Similarly, almost 70 per cent of information technology jobs were deemed short of workers, including software engineers, web developers, and cybersecurity specialists.

Dutton’s proposal to cut the permanent intake to 140,000 from 185,000 will require Australia to welcome fewer skilled workers, who receive about 70 per cent of permanent residency grants.
In 2022-23, the top 10 occupations granted permanent residence included midwives, engineers, programmers and medical practitioners.
Cacho says cuts to skilled migration will exacerbate labour shortages, particularly in areas such as health and aged care, where there are significant regulatory changes and unmet demand for care workers and nurses.

Wiltshire says the effect of migration on labour shortages isn’t clear-cut. While migrants fill holes in the job market, they also earn an income and spend money, adding to demand and creating shortages elsewhere.

“In aggregate, the balance is minimal in terms of the impact on solving labour shortages, but certainly in some sectors they definitely do,” he says.

Both Labor and the Coalition’s efforts to cap international student numbers will have a disproportionate effect on low-paid industries such as retail and hospitality, where students have become a significant source of labour for employers.


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Cacho says the recent influx of international students is one of the reasons why worker shortages are less acute in these sectors than in other parts of the economy.
In the 12 months to February 2024, the number of vacancies in the hospitality sector declined almost 40 per cent, while openings in other industries fell by a more modest 15 per cent.
Dutton has proposed increasing the number of hours per fortnight that an international student can work from 48 hours to 60 hours to temper the effect of the migration cuts on the jobs market. However, experts warn this could encourage applications from non-genuine students applying for cheap courses as a backdoor way into the Australian labour market.
The Coalition’s pledge to cut NOM to 160,000 could also force it to apply tougher criteria on demand-driven temporary visa programs if it wants to spread the burden beyond the foreign student program, potentially affecting a much broader segment of the labour market.
No ‘magic solution’ for housing

Dutton has billed his changes to permanent immigration rules and restrictions on foreign property buyers as a plan to help Australians by “restoring the dream of home ownership”.
House prices are at record highs despite 13 interest rate rises. Demand for established homes has held up, while supply has failed to keep pace as rising material and labour costs force developers to shelve plans for new builds.
The same factors have also pushed rent inflation to a 15-year high of 7.8 per cent, with vacancy rates at or near record lows in most capital cities. The influx of international students has added to demand in inner-city rental markets in Sydney and Melbourne, close to major universities.
But Cacho says Dutton’s package is not going to solve Australia’s housing crisis, even if there are small effects on rents and prices at the margin.
“It’s not like having zero migration for 12 months is going to magically make houses appear,” he says. “It will help the situation to not get worse because you’re reducing the increase in demand, but it’s not going to solve the problem in and of itself.”


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Cacho notes that the biggest driver of rents is income growth. “If income growth remains strong, you’re probably going to see rent growth remain relatively elevated.”
Wiltshire says every additional 100,000 migrants boosts rents by 1 per cent. Therefore, any cuts will have a small effect on housing affordability. A better way to make housing cheaper would be to build more homes.
While international student cuts would have a modest effect nationally, Cacho says there could be a localised effect on rents in places such as Haymarket and Ultimo in Sydney, as well as the Melbourne CBD, which are popular with foreign students.
Dutton also says he will put a two-year ban on foreign investors and temporary residents purchasing existing homes in Australia if the opposition wins the next federal election.
However, few housing market watchers expect the measure to have much of an effect on prices. Foreigners are largely already prevented from buying established homes, with policy aimed at funnelling overseas buyers into off-the-plan developments that boost the housing stock.
Temporary residents can apply to the Foreign Investment Review Board to buy an established dwelling, provided it is used as their principal place of residence and sold within three months of them moving out. FIRB granted just 1339 approvals to purchase established dwellings in 2021-22.
While Dutton’s proposal to cut permanent migration would do little in the short term, Cacho says it will reduce the attractiveness of Australia as a destination for skilled workers, who are increasingly vital for plugging workforce gaps caused by the ageing population.
“In the long term, it’s damaging and, quite frankly, it’s poor policy,” he says.