What will the budget bring?
With the Federal Budget less than a week away, the big question on everyone’s minds is what Australia’s immigration program will look like in 2021.
There are two trains of thought:
- That the government will need to increase net migration over coming years to maintain growth in the economy and help drive property development, education and business expansion.
- Alternatively, the government will move to decrease net migration and skilled migration in particular, as well as resources to the Department of Home Affairs, at least in the short-term, because the politics of COVID unemployment will be too risky at this point of time.
As with most things, the most likely result is something in the middle.
This article is meant as a precursor to the budget announcements and the beginning of our analysis and planning with clients for 2021 and beyond. We will host a webinar on 8 October for a post-budget debrief where we will break it down and provide our thoughts on what to expect from Australian Immigration in 2021.
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Some Concepts to Understand
When reading or listening to any discussion about migration it is important to first understand a few key terms and concepts.
Net Migration is the difference between the number of immigrants (people coming into Australia) and the number of emigrants (people leaving Australia) throughout the year. In Australia, this includes all people immigrating or migrating permanently or for the long-term and so includes most temporary visa holders including 457/TSS visas, students and working holiday makers but not tourists. For the last couple of decades Australia’s net migration has hovered between 100,000 and 250,000 people per year.
Permanent Migration Program is the annual number of permanent visas granted in any given year including primary applicants and family members. This includes skilled, family and refugee visas. For the last two decades the program has been capped by government between 100,000 and 190,000 visas per annum (more than 150,000 per annum for the past ten years). In the 2020 program year skilled visas made up 69.5% of the program, the rest was divided between family and humanitarian places. About 40% of the skilled program (about 37,500 places) were employer sponsored.
Temporary visas include all long and short-term temporary categories such as sponsored skilled workers, students, tourists etc. Unlike permanent visas, temporary visas are demand driven and not generally subject to caps, although in some parts of the program there are limits on the numbers, such as working holiday makers from some countries.
Effects of COVID
Immigration
Three main things have happened in the immigration world since COVID:
- Borders have effectively been closed since 20 March 2020, virtually stopping any new visa holders arriving and severely restricting departures. This has eased somewhat in recent weeks with the expansion of essential worker exceptions.
- Processing of visa applications ceased or slowed other than for the most urgent of applications or those considered to be in the national interest. This is also improving as more case officers come back online.
- Some temporary visa holders left Australia, although the real surprise is that it is nowhere near as many as you might think. On 31 December 2019, there were more than 2.4 million temporary visa holders in Australia including 140,000 skilled workers. By 30 June 2020 that number had decreased to just over 2 million. Importantly, however, nearly all of the departures were tourists. Student visa holders in Australia remained almost exactly the same during this period and temporary skilled workers actually increased (many were away for Christmas). We do not yet have the numbers for September but are not expecting things to have changed hugely.
The economy
It is clear that the additional government debt levels incurred as a result of the Covid-19 impacts will demand a continued expansion of the Australian economy in the coming years. Organic economic growth alone has never been the sole solution for governments of either persuasion. In particular the dramatic drop in birth rates reflected in the recent report by the ABS on birth and overall fertility, now falling below an average of 1.74 births per woman, is the lowest on record and there is every indication this will continue to fall in the short to medium term. Combined with an aging population there is little alternative to expansion of Immigration programs to meet the economic demands of the country. It is widely acknowledged by governments that selective skilled immigration programs have a multiplying effect on the economy. For every skilled migrant entering the workforce there is a resulting increase in the employment of semi-skilled and unskilled Australians and a significant impact on growing the overall economy.
On the economic front it has been a mixed bag. Many employers, particularly in hospitality, retail and travel, have had to stand workers down temporarily or have them work reduced hours. In other sectors such as tech and construction things are booming after a temporary pause in the first months of COVID.
Overall unemployment was recorded at 6.8% on 17 September 2020, although this does not take into account some 3.5 million workers on JobKeeper and the likely upturn in retail and hospitality leading up to Christmas. It will take months for the real unemployment rate to become clearer, but there is no doubt that there has been an impact on the number of Australians out of work in certain sectors.
Speaking to our clients, nearly all say that any temporary rise in unemployment has not resulted in any lessening of the need for highly skilled and specialised overseas workers and in many sectors such as tech and infrastructure construction this has only grown as their businesses have expanded under COVID. Given it has only been six months or so, there cannot be any serious argument that out of work Australians could have been reskilled to fill occupations that have traditionally been supplemented by overseas workers such as IT specialists, senior managers, engineers, and construction project managers.
So, what can government do?
Do nothing and win
With borders closed and international travel at a fraction of its pre-COVID numbers, net migration has fallen and will continue to fall without government doing anything. Tourists and students are not coming and over 400,000 tourists have left Australia since December. Until there is some safe way to open borders this will not change, although the pressure to find a way to allow students to come to Australia is huge and increasing. It’s likely this will be facilitated in some way this year or early next. Limited tourism within travel bubbles is also a real possibility.
Play with the numbers in the short term
Government can decide to reduce the caps on permanent migration in the sort-term, but it is hard to see how they will do this in the long term without seriously impacting economic recovery – property prices are falling and new dwelling development is down. Less people will mean less tax will recovered. Australia needs population to drive consumer demand and growth.
It’s also hard to see where they could make the cuts. Employers still need skilled workers and the government will be loath to send a message to highly skilled people that they are not welcome in Australia.
In fact, the government has continued with its push for Global Talent through the Global Talent visa initiative right through COVID and it will be a major plank in the program going forward. The family program is already quite restricted and Australia has repeatedly affirmed its commitment to take a certain number of the world’s refugees.
That said, with borders closed, there is capacity to make a ‘reduction’ in planning numbers at least in the short term (till June 2021) should that work politically. Government could do this with little impact knowing that in reality the number of migrants during this period will be naturally curtailed by the virus and travel restrictions. This could give government a political ‘win’ while the economy kicks off and borders become safer to open.
Tweak the rules
It is also likely that government might make some changes to the permanent and temporary skilled programs that could reduce numbers without specifically saying so or using caps. Some of this is already occurring.
Over the past six months processing has been slowed or stalled for many employers in impacted sectors such as hospitality, retail and tourism. Requests for detailed justification of the need for overseas workers has increase, reflecting an increase in scrutiny of these applications.
From 1 October 2020, Labour Market Testing requirements will increase. Under the new rules employers will now also be required to advertise on the government’s Jobactive website. This will help justify granting visas to overseas workers in times of higher unemployment.
In March 2020, the annual review of occupation lists had already recommended that a number of occupations be removed altogether meaning they cannot be sponsored. Even more occupations were slated to move from the 4-year list to the 2-year list, shortening stays and removing a pathway to permanent residence. Those changes were delayed due to COVID but ever since then the smart money has been on many more occupations being removed – particularly in impacted industries. Employers and employees in these sectors should really ready themselves for bad news.
When will we know?
Most pundits are predicting that the government’s plan will be revealed in the budget on 6 October and we certainly hope that this is correct so that employers and employees can plan, but more likely there will be some announcements and some reading of the tea leaves that can be divined from what is said or where the money goes, but that a lot of the detail will come later, particularly as more information comes to light on long-term unemployment.
Whatever is said in the budget Ajuria Lawyers will analyse it and give you the practical answers as we know them.
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DISCLAIMER This information is current as of 2 October 2020 and subject to change. The information contained in this publication is of a general nature only. It should not be used as legal advice. To the extent permissible by law, Ajuria Lawyers and its associated entities shall not be liable for any errors, omissions, defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information. Liability limited by a scheme approved under Professional Standards Legislation.
