- KPMG has released new analysis of the economic cost of Australia’s hard international border, calculating it would shave $117 billion from national GDP by the end of the decade.
- By 2030, stalled migration would shrink Australia’s 2030 population by 1.1 million people and have cost every Australian the equivalent of $2,800.
- KPMG economists model that if just 40,000 skilled migrants were allowed to enter, they would produce a near $5 billion boost.
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Australia is beginning to mull the cost of some of its hardest lockdown measures as the pandemic wages on with no end in sight.
On Friday, KPMG economists put the price of the country’s hard external border at $117 billion if it were to continue on for a decade.
The eye-watering total is the difference between how Australia was expected to grow and how the economy will actually develop deprived of migrants and visitors of all kinds.
“The annual loss of GDP and national income from reduced immigration is caused by two factors,” KPMG economist Brendan Rynne said.
“The first is fewer working-age people supporting older Australians, as migrants are typically younger. The second is the loss in productivity since the immigration program is deliberately tilted towards skilled migrants including university students and graduates.”
In total, it would cost each Australian the equivalent of $2,800 and would shave 1.1 million people from Australia’s 2030 population.
The clock is ticking. If a vaccine were found within 12 months, the shortfall is estimated to instead reach 420,000. After two years, the impact would run over the one million mark.
While a ten-year lockout of migrants isn’t necessarily on the table, the numbers suggest such a prospect is entirely untenable.
The impact of stalled migration, after all, is already showing up across the country. The sudden disappearance of international students has pulled the rug out from Australian universities which bet the house on their tuition.
The lack of international visitors meanwhile has scuppered tens of thousands of aviation and tourism jobs. While those layoffs are inextricably wrapped up with huge falls in domestic tourism as well, the bones of it remain the same.
That’s before even mentioning the flow-on effects of a shrunken population that ranges from reduced spending to lost tax revenues.
“I think Australia should say openly that talented, working-age people must become a higher proportion of our overall population because our natural birth rate is below replacement levels and we have a growing number of retirees,” KPMG global education lead Stephen Parker said.
“If international students make the sacrifices to come to study here, supporting our educational institutions and adding to our diversity, then we will look favourably upon them if they wish to stay.”
With Australia having failed to eradicate the virus entirely, KPMG’s numbers suggest the all-or-nothing lockdown measures may require more nuance going forward – which is certainly the argument being championed by the private sector this week.
“Our modelling found that even a modest 40,000 additional skilled working-age migrants would boost GDP by up to $4.7 billion by the end of the decade. Overseas students, if given a clearer pathway to residency, would be a means to achieving that end,” Rynne said.
“Extra incentives will be needed to make them choose Australia, as in the post-COVID-19 world competition for international students will be intense, so we propose an accelerated and targeted intake program.”
Some headway appears to have been made on bringing international students in, with 300 from China, Hong Kong and Japan flying into Adelaide and quarantining in the coming weeks as part of a pilot program.
Beyond that, however, it’s unclear how or when Australians will loosen its international borders. First, the country’s federal and state governments will need to sort out their domestic ones.
That’s expected to be a top priority of the National Cabinet meeting on Friday.