As the coronavirus turns the immigration tap off, the Australian economy looks increasingly exposed

Australia depends on immigrants. (Ryan Pierse – CA, Cricket Australia via Getty Images)
  • Australia’s economy has long depended on immigration, which is now under threat from COVID-19.
  • As restrictions see the immigration tap turned off temporarily, other visa workers have returned home to see out the pandemic.
  • Both factors risk undermining the broader economy, urban planner and UNSW professor Shane Geha told Business Insider Australia
  • Visit Business Insider Australia’s homepage for more stories.

As the coronavirus shuts down borders, Australia’s economy risks running out of people.

Like many developed Western nations, the simple equation is that a measly birth rate leaves the country going backwards without some outside help.

“Migration is an essential part of that equation for Australia because we don’t actually have a local solution,” urban planner and UNSW professor Shane Geha told Business Insider Australia. “The fact we’re having 1.9 children per couple means we don’t even replace mum and dad.”

Australia’s economy has relied on immigration since European settlement, spanning the gold rush through to the post-war era, and guaranteeing greater production and consumer demand.

But as governments around the world have locked down borders, the coronavirus has turned Australia’s vital immigration tap firmly shut for the first time in recent history, and it poses an enormous threat.

“The only people who really pay [income] tax in Australia is the 20 to 60 years of age demographic, which only makes up 48.5% of the entire population and is shrinking by 0.2% every year,” Geha said.

Well at least it was shrinking by that margin when there were 165,000 immigrants welcomed into the country each year. Without those, Australia’s tax base faces risks being seriously undermined at the same time that revenues from businesses and individuals are already taking a hit.

With the Coalition government now facing unprecedented debt levels, there aren’t really many options for it.

“If you didn’t want to rise taxation to maintain GDP growth, and revenues, and tax and the tax base, you basically have to have either more babies or import people in the 20 to 60 age group,” Geha said. “That remains a very important part of keeping our economy running.”

It’s just another challenge facing Treasurer Josh Frydenberg, who on Thursday emphasised the government’s priority was to raise revenues through economic growth, not with more taxes. If he and his government are to achieve that, they’ll need to at some stage soon relax restrictions on incoming migrants.

“If this were just a health crisis, you could simply keep the current lockdown going for six months, but the government knows it has to balance the economics as well. I don’t think we could last much past May with the current restrictions, I really don’t,” Geha said.

While it’s unlikely the government will throw caution to the wind, Geha and others suggest restrictions could be progressively relaxed over a period of time so as to reopen businesses without risking a feared second wave of cases.

The development of quick tests that would be able to diagnose or clear people in a matter of minutes may prove crucial to this reopening strategy, according to Geha.

In the meantime, he suggests Australia has to do better with those visa workers who are already here, with many already having left.

“Visa workers are fulfilling a very important role in our economy and I think we should have a special category for them in terms of allowing them to stay here,” Geha said.

“We could give them a support allowance, like the Jobseeker payment. It maybe doesn’t have to be as much as Australians receive but they’re important to our economies, to sectors like agriculture and mining among others. We need them.”

While Australia should remain conscious of the health risks of the pandemic, Geha believes the country will need to start making some tough decisions sooner rather than later.

“It is the people in our economy that generate wealth, so the more we lock them down, the more difficult this is going to be for us to recover economically in the long term,” he said.

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