How will migration cuts impact WA?

13/06/2024 | 3 mins

This article is by Professor Amanda Davies, Head of UWA’s School of Social Sciences, and Professor Peter Robertson, Dean of UWA’s Business School.

For decades, Australia has been using international migration as a way of growing the population and workforce and bolstering economic activity. However, Australia’s major cities are now straining under this population growth.

Attention has swung to Australia’s recent growth in international migration, and, in particular, the post-Covid spike in international student arrivals. This growth has been conflated with the housing crisis.

The Federal Government and Opposition have both committed to cuts in Australia’s migration – particularly international students – to reduce population growth-related pressure on infrastructure and services.

We have taken a look at the data on international migration, international students and interstate migration to consider plausible implications of migration cuts for Western Australia.

It’s about skills

Migration brings many benefits to Australia in terms of diversity, security and international relations.

In terms of economics, international migration has benefits and costs. Migration has been favoured by politicians to boost short-term economic growth. If it is well targeted, skilled migration may address skill gaps in the labour force and increase productivity.

But there are costs as well. Migration can put a strain on public infrastructure such as hospitals, schools, roads, government services and utilities, which limit the economy’s capacity to absorb migrants in the short run. As former NSW premier Bob Carr once said, “Sydney is full.”

In the longer term the capacity constraint can be overcome with investment that is paid for with a higher tax base and higher productivity growth. This can be particularly important for a smaller city such as Perth that has capacity to grow and may be critical for the State’s future – in order to compete on the world stage for industry, arts and talent.

These longer-term economic benefits, however, depend on migrants’ skill levels, and whether they raise the average skill level of the workforce.

The surprising loss of permanent skilled migrants

While WA has a huge demand for skilled labour, it has been experiencing a steady decline in permanent international skilled migration for more than a decade. At the same time, there has been an increase in the number of skilled migrants leaving WA.

This decline has not been offset by a long-term growth in temporary skilled migrants, which remains well under what would be expected in ‘boom’ times.

Given WA’s population has been growing, this means that the proportional share of skilled migrants in the State’s population has been decreasing. This is a problematic trend for WA.

While both the Federal Government and Opposition are seeking cuts to migration, they have both tabled strategies to secure or increase skilled migration.

The WA Government has also come to the party in providing support for visa costs of some in-demand skilled migrants, such as the construction sector.

These new Federal and State policies, aimed at better targeting skill shortages and matching these with skilled immigrants, are well executed, and could be benefit the WA economy.

How international education is bolstering our skilled labour supply

WA’s international education sector is now worth $3 billion to our export economy. Nationally, the sector is worth just under $50 billion and is well-positioned for growth. So why is the Government looking to cut the number of student visas?

There is no doubt that the growth in international student arrivals has put pressure on an already extremely stretched housing system.

The recent rapid growth in international student migration has been caused, in part, by a ‘concertina effect’ following the reopening of international borders.

International student graduates are an important part of our workforce. For many international students Australia is a short-term destination. But for others, after their initial study they move into secondary study or the workforce through various visa schemes.

WA has a low departure rate of international students, and this has added to the overall population growth we are experiencing.

As of October 2023, there were 33,000 international university students, 23,400 VET students and another 9800 were enrolled with English language providers in WA (PRISMS, 2023).

Trying to work out how cuts to student migration will impact WA’s economy, workforce and population is not straightforward due to the diversity of study plans and employment pathways once they enter Australia and the lack of data on this.

For example, we can’t tell if those who graduate and move into employment are graduates of hospitality courses or engineering courses. It also means it is difficult to validate the under-engagement of skilled migrants.

So, we don’t know how international students and graduates are integrating into the economy, what they are bringing in terms of skills, nor what the skills gaps are.

For this reason, a cut to student migration is a concern, as it could have a critical impact on WA’s workforce skill base. Moreover, as the international education sector grows, it’s likely to become an even more important as a way of recruiting locally educated talent to meet WA’s growing skills needs.

The impact international students on housing demand

The rental crisis in WA is due primarily to the commodity cycle and the loss of construction workers following the resources boom and Covid-19. Nevertheless, immigration is a contributing factor that can make a difficult situation worse.

This is a national problem, but there are some very important differences between what is happening in WA and what is happening “over east”.

First, the recent growth in student numbers in WA has been very large and, proportionally, larger than other states. This is a recent change, but with the possibility of caps on students, it may also be a future trend.

But importantly, WA is also a net recipient of interstate migration. This contrasts with Victoria and NSW, both losing population to other states. So overseas migrants accounted for 72 per cent of WA’s population growth, compared to nearly 90 per cent of Victoria’s growth and 100 per cent of NSW’s population growth (ABS, 2024).

This means that, at the moment, despite a relatively high inflow of international students into WA, the contribution of international students to WA’s overall population increase (natural increase plus interstate Australians, students and other international inflows) is not too different from other states, and still lower than Victoria and NSW.

So what are the key takeaways

Trying to work out how cuts to migration, particularly student and graduate visas, will impact our economy, and what this means for WA - Australia’s fastest growing state is not straightforward due to limited data.

But as a powerhouse of growth, WA may not be attracting and retaining the skilled labour it needs. Planned adjustments to the national migration settings and various programs from the WA Government could see this improve.

In particular, international student graduates could be an important source of locally educated skilled labour. It is therefore important that policymakers account for this in any changes to migration settings for WA and ensure opportunities for addressing skills needs and attracting talent are maximised. 

This also means placing greater emphasis on the longer-term benefits to WA of international students and migrants and Federal and State responses to migration pressure should be nuanced according to the differing needs of states.

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