Rents are skyrocketing, and public anxiety about migration is growing. In response, Opposition Leader Peter Dutton has proposed to cut migration significantly. The plan includes reducing permanent visas from 185,000 to 140,000 annually for the next two years and gradually increasing to 160,000 per year. Additionally, humanitarian visas would drop from 20,000 to 13,750 per year. The Opposition also aims to cut net overseas migration to 160,000 next year, 100,000 fewer than the Government’s forecast, and reduce it by a quarter over the next five years.
What does this mean for Australia?
Brendan Coates and Trent Wiltshire from the Grattan Institute argue that cutting permanent migration could make housing slightly cheaper. With fewer migrants settling in capital cities, the pressure on rents would ease. However, the immediate impact on housing demand would be limited because many permanent skilled visas go to migrants already in Australia.
Coates and Wiltshire estimate that cutting permanent visas would lower rents by about 2.5% over a decade. More substantial impacts on housing would come from reducing net overseas migration, which could lower rents and house prices by about 4% if maintained at 190,000 annually, or by 6% if cut to 160,000 annually. However, achieving such cuts is challenging due to factors beyond the government’s control, such as temporary visa programs and Australians moving abroad or returning home.
Peter Dutton’s plan could lead to steeper cuts in international student enrolments unless other temporary visa programs, like working holidaymakers and temporary sponsored workers, are also tightened. Prioritising onshore applicants for permanent skilled visas could help avoid adding to net overseas migration but might mean missing out on highly skilled migrants.
Coates and Wiltshire highlight that while fewer migrants might mean cheaper housing, it would also make Australians poorer. Skilled migrants boost government budgets by paying more in taxes than they receive in services. Cutting the number of permanent skilled visas could cost Australian governments $34 billion in lost taxes over the next four years and up to $211 billion over the next 30 years. The annual cost could exceed $10 billion by the late 2040s.
Skilled migrants also lift the productivity of local workers through new technologies and business practices. Research indicates that regions with higher migrant shares have more productive workers and higher wages. A 10% increase in migrant share can raise wages by 1.3%, and a 1% rise in university-educated migrants can increase patent applications by 4.8% over five years.
Despite concerns about migration’s impact on skills shortages, Coates and Wiltshire note that migrants contribute to both labour demand and supply, often resulting in little to no overall impact on local wages. Migrants’ spending and economic activity can create as many jobs as they fill.
Cutting migration, particularly skilled migration, might make housing more affordable but would also diminish Australia’s economic prosperity. Skilled migrants play a crucial role in boosting productivity and government budgets, ultimately raising incomes. Reducing their numbers would make housing a bit cheaper but would definitely make us poorer.
To read the full blog by Brendan Coates and Trent Wiltshire, click here.
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Opposition Leader Peter Dutton's plan to cut migration might lower housing costs but will reduce economic prosperity by impacting government budgets, productivity, & overall incomes. 🌏🏠📉👨💼🇦🇺 #TheIndianSunhttps://t.co/V0I18FsFpw
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