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Tim Watts and Daniel Grollo*

"Migration Levels Must Rise"

BRW

July 24, 2003

Australia is known as the lucky country, but sometimes we do not make the most of our luck. Our immigration policy is an example. Australia is fortunate enough to have reserves of human resources equivalent to about 12% of our labor force, lying idle, untapped. This dormant "human capital" is the approximately 1.2 million foreign nationals who have applied to migrate to Australia in 2002, according to the Department of Immigration.

Some of these people are seeking to escape despotic regimes, to reunite with family members or to escape dangerous environmental conditions. However, a large majority are interested in the economic opportunities that accompany the right to work in Australia.

Many of these potential migrants are prepared to bring money to invest and start their own businesses. Many also have high-quality tertiary qualifications in science, engineering and business. Many are prepared to apply for a category of immigration visa that requires them to prove their ability to survive without reliance on welfare.

Of these 1.2 million applicants, about 10% were successful in gaining entry in 2002.

There are many intelligent and cautious people who believe Australia should not increase its population. Their reasons are varied. Some focus on environmental concerns, citing the problems with mismanagement of the water flow in the Murray-Darling river system and the pollution and resource depletion ascribed to high population density in inner Sydney.

These are certainly important issues but they are separate to immigration policy. Each can be addressed by good government policy. If Australia took 400,000 immigrants a year for the next five years it would need to manage its water supply in a more disciplined fashion and improve planning in its biggest population centres to ensure the quality of city life is not harmed. However, these policy changes are not expensive and need to be implemented even if low immigration levels are maintained.

Regional Australian cities such as Hobart, Bendigo and Newcastle desperately need bigger populations. A smart immigration program, focusing on the skills shortages of such cities and which use the tax-and-transfer system to create large economic incentives for new immigrants to settle in these areas, would bring a much-needed boost for these regions.

Objections to higher immigration from the trade union movement often centre on the claim that unemployment will rise if Australia lets in more workers from overseas. This claim is supported by the experience of areas such as California, but it is not supported by many economists. Unemployment levels in this country are stuck at 6% and, for young workers in particular, good jobs are scarce. On the face of it, a low-skilled, low-paid member of the Australian workforce would be sensible to fear an influx of high-skilled migrants who are used to tougher overseas working conditions.

Fears of higher unemployment are misplaced because issuing more visas to particular categories of migrant will actually create jobs. LookSmart chairman Evan Thornley recently argued that foreign students and backpackers should be encouraged to settle in Australia rather than being sent home when they overstay their visas. His argument is that young, educated foreigners are the key to increasing Australian exports and lowering unemployment. Thornley says Australia's future prosperity is contingent on the country's building high value-adding industries in science and technology. Highly educated, risk-taking people are needed to do this. He also says Australian exporters need to improve their relationships with business people in foreign markets. Foreign students and backpackers who stay on to live and work in Australia are exactly the type of people who can assist our export industries in this way.

Another common objection to increasing immigration is the contention that new migrants are a drain on the economy when they first arrive because they need welfare payments, public housing and English-language training. Obviously, some migrants will need this sort of assistance in the short term, but many will not, especially those who have already settled in Australia after arriving as backpackers and foreign students.

In the long term, the return on taxpayers' investment from assisting new immigrants will, in almost all cases, be high. One year of government support for an immigrant will lead to a lifetime of employment, tax payments and contribution to the economy and community.

The demand for Australian working visas is high and the quality of applicants strong. The Federal Government obviously has a large administrative burden in checking every one of these applications and has many non-economic considerations when setting migration policy. However, the number of working visas issued each year is too low.

Treasurer Peter Costello has proven himself a very able economic manager. He has been responsible, cautious and made very few mistakes. But in order to ensure our prosperity continues, he must set some forward-thinking, growth-oriented policies. Increasing the number of working visas would be a smart and electorally popular choice.

*Daniel Grollo is the Joint Managing Director of construction company Grocon Ltd