The Hidden Costs of Migration Cuts in Australia
As the Australian federal election approaches, contentious discussions are unfolding around the Coalition’s proposal to slash net migration by 100,000 starting next year. Shadow treasurer Angus Taylor has been vocal about this plan, yet what remains largely unaddressed are the financial implications that could unfold as a result.
A $24 Billion Budget Hole
The Coalition’s proposition to cut migration presents a concerning fiscal reality: it could create a staggering $24 billion hole in the federal budget. This figure starkly contrasts with the Coalition’s claimed $14 billion improvement in the deficit over four years when compared to Labor’s election policies. With these proposed cuts, the Coalition’s assertion of being more adept at managing economic matters diminishes rapidly.
Miscommunication on Migration Numbers
In recent press conferences, Taylor has conflated the reduction of permanent migration with the commitment to reduce net overseas migration. He stated, “Permanent migration, humanitarian, student visas… that adds up to 100,000 people over the next 12 months,” suggesting a straightforward correlation. However, this oversimplification is misleading. In reality, a significant portion of permanent visas are awarded to individuals already residing in the country.
The Numbers Explained
To understand the gravity of the Coalition’s migration targets, we need to break down the numbers. Typically, about 30% of permanent visas go to applicants already in Australia. Therefore, the pledged cut of 45,000 in permanent migration translates to approximately 13,500 in net migration terms. Extending this to the promised reduction of student numbers and humanitarian intake reveals that targeting a cut of 100,000 is an incredibly complex endeavor.
Budget Implications Over Time
The ramifications of cutting permanent migration create a domino effect on Australia’s financial outlook. The Coalition’s own budget estimates suggest that these reductions would cost $4.2 billion over the next four years. The Parliamentary Budget Office (PBO) estimates that the impact of lowering net overseas migration could cause an additional $24 billion deterioration in the underlying cash balance by 2028-29. This culminates in an astronomical fiscal hit of $201 billion over the next decade.
Population Growth: The Economic Engine
At its core, a larger population can boost economic growth. More people contribute to consumption, driving higher tax receipts for the government. While increased population does not automatically equate to a better economy, it is crucial in creating a foundation for sustained growth. Migrants, who often bring youth and skills, tend to be net contributors to the fiscal landscape over their lifetimes, debunking the myth that migration is solely a fiscal burden.
The Housing Crisis Connection
The Coalition has frequently pointed to increased migration as a culprit in the escalating housing crisis. Although it’s true that migration can affect housing demand, attributing the entirety of the crisis to migration overlooks other contributing factors. These include borrowing costs, taxation policies, and the overall supply of new homes. Economists, such as those from the Centre for Independent Studies, project that cutting net migration could reduce housing prices and rents by up to 11% in the next decade, indicating a nuanced relationship rather than a direct cause-and-effect scenario.
Deficits and Defence Spending
Another layer to this debate is the Coalition’s promise to significantly enhance defense spending over the next decade. In this context, reducing net migration appears increasingly counterproductive. Budget deficits, exacerbated by cutting immigration, lead to heightened national debt, projected to be $200 billion more by 2035-36.
The Fiscal Dividend
Ultimately, what governments do with the fiscal dividends gained from a growing population plays a critical role in shaping the nation’s economic trajectory. Even if migration increases pressure on housing and public services, smart investments in infrastructure and social programs can mitigate these challenges.
Unaddressed Costs in Coalition Proposals
Despite their importance, the Coalition’s costings fail to address these critical numbers, leaving voters uninformed about the potential consequences of their migration policies. As election day approaches, it’s essential that these calculations be considered comprehensively in public discourse, ensuring that Australians are fully aware of what is at stake.
This structured exploration of the fiscal implications of reducing migration underlines a complex interplay of economics, policy, and societal needs, all of which are crucial for informed voting during the upcoming election.
