Here's A Huge Potential Benefit To Australia's Economy From Migrants That No-One Talks About

Back in March when Julia Gillard was talking about cracking down on alleged 457 visa rorts by employers, an enraged project manager from a large Queensland-based construction company explained to me how it would play out on the ground.

It wasn’t a case of getting six guys in from overseas on 457s to work for reasonable rates on site, he said. It was about finding the skilled engineer that would oversee six Australians.

Even with some of the red heat starting to come out of the mining sector, skilled workers were just too hard to find. He couldn’t deliver the Australian jobs without the migrant.

It was, he believed, putting some large construction projects at significant risk of delay.

A research note from ANZ on Australian demographics this week combs through the details of some familiar themes around the structural shifts in the workforce as Australia’s population gets older.

But the section on immigration underlines how critical migration settings are to future growth, the continuing improvement of living standards, and the government’s ability to invest in education, health and infrastructure.

The report by Dylan Eades, Paul Braddick, and chief economist Ivan Colhoun also canvasses a more complex layer to the potential productivity and growth upside that can be unlocked by migration policy settings. In short, it’s that well-designed migration programs can build more sophisticated business and cultural links with overseas markets and position Australia better in the global economy.

As with the case of the construction manager who needed the engineer, the effects of migration programs can be complex, with significant flow-on effects that are difficult to link to the issuing of a visa.

Unfortunately while Australia has fairly rational public discussion on most policy areas, when it comes to immigration many people take leave of their senses and take up dog whistles instead.

But with Australians getting older the migration program is critical in order to pay to look after them and also have enough productive workers and taxpayers to keep the economy growing.

One number that jumps off the page in the ANZ note is that a reduction in migrant intake by 80,000 a year would reduce the size of the Australian economy by $900 billion, cumulatively, between now and 2030.

Here’s the chart:

And from the note:

Under our baseline scenario we have assumed that net overseas migration will remain constant at 180k per year. If government policy lifted net overseas migration to an average of 250k per year, this would increase potential GDP growth by 0.2ppts per year, on average between 2013-2030 (compared to our baseline scenario). This would cumulatively be worth around AUD760bn by 2030 to the Australian economy.

In contrast, if net overseas migration slowed to an average of 100k per year, then potential growth would be lowered by 0.3ppts per year, on average (compared to our baseline scenario). This would cumulatively reduce the size of the Australian economy by around AUD900bn.

There are many factors that affect migration, only some of which can be controlled domestically. But with living standards here the second-highest in the world, decent infrastructure, and an extremely low unemployment rate, there’s a lot of built-in sustainable appeal for people if the country needs extra pairs of hands.

Then there’s this thought-provoking point about some of the hidden benefits of a smart immigration program:

A less talked about phenomenon … is the benefits that immigration may generate through the development and/or deepening of personal and business networks across countries. For example, data shows that most foreign investment inflows into Australia occurs from the US and UK, countries that Australia has historically shared common cultural values with.

Likewise, the majority of foreign investment inflows into China originate from countries with large ethnic Chinese populations. This likely reflects that ethnic Chinese are more comfortable with the Chinese business culture and already have existing business relationships which they can leverage.

Encouragingly, of Australian residents who were born overseas around 40% now originate from Asia, up from 25% a little over a decade ago. The same applies for the large number of international students studying in Australia, with Chinese, Indian and South Korea students accounting for 45% international student enrolments in Australia.

Aside from the benefits to the Australian education sector, it allows both international and local students to build better cultural understandings and relationships, preparing them to actively participate in a global economy.

Being a smart country with a smart immigration policy means getting this part right, too – figuring out the opportunity, having the right incentives and rules in place to get the best out of the migrant population that is an essential part of Australia’s economic mix.

Follow Business Insider Australia on Facebook and Twitter

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.