Australia is addicted to high immigration, so it could burden more working-age people as couples have fewer children and the population ages, a government report says.
The Treasury has warned that the alternative to high immigration would be even higher income taxes as those over 70 will make up a larger share of the population in coming decades.
The Institute of Public Affairs, a libertarian think tank, calculated that a record 31 percent of Australia’s population is now born abroad – more than double the US 15 percent and the UK 14 percent.
It is also significantly higher than Canada’s 21 percent and New Zealand’s 29 percent.
A net of 518,000 migrants moved to Australia in the 2022-2023 financial year. This slowed to 447,790 at the end of last year.
Australia is addicted to high immigration, so it may burden more working-age people as couples have fewer children and the population ages (pictured is a train from Sydney)
But before long-term departures were taken into account, almost 1.1 million foreigners moved to Australia on a permanent and long-term basis in 2023, Australian Bureau of Statistics data shows.
Both Deloitte Access Economics and Treasury expect overseas inflows into Australia, including skilled migrants and international students, to slow to 375,000 by 2023-2024.
This would still be almost double the pre-pandemic level of 194,400 in 2019-2020, before Australia went into lockdown from March 2020 to December 2021.
Immigration increases the labor supply
Deloitte’s ‘Right Sizing The Workforce’ report calculated that the recent wave of immigration meant the country had 693,600 more working-age people than before the pandemic.
In December there were 17.5 million people between the ages of 15 and 64.
“That strength is due in large part to the recovery of international migration, which is giving Australia access to young and (in many cases) skilled workers,” the Deloitte report said.
“Australia’s population continues to be boosted by record overseas migration.”
Australia’s fertility rate fell to just 1.7 in 2021, putting it well below the replacement level of 2, as those in first world countries have fewer children.
Baby boomers are retiring
Baby boomers also began retiring in numbers in 2006, when the oldest among them turned 60 and began accessing their pensions.
The working-age component of Australia’s population peaked in 2005–06, when 48.5 percent of the population paid income tax and a large generation of Australians were still working.
That fell to below 43 per cent in 2012-13, but rose again closer to 46 per cent in 2019-20, when net overseas migration rose above 200,000 again.
Higher income taxes
The Treasury’s Intergenerational Report, published in August, warned that the alternative to higher immigration would be higher personal taxes.
“As the population ages, the personal tax base is expected to decline further, in line with the expected decline in labor force participation,” the report said.
‘In the absence of policy change, the projections show an increasing dependence on personal income tax.
“Taxpayers as a percentage of total population have fallen since the peak in 2005-2006, despite a similar employment-to-population ratio.”
The Treasury Department still expects personal tax revenues to grow from 12 percent of gross domestic product in 2022-23 to just over 14 percent in 2062-63.
Only 12 percent of Australians aged 70 and over pay income tax, while this group now makes up 12.2 percent of the total population.
The number of elderly people was expected to increase to 18.1 percent in the period 2062-2063.
The Treasury has warned that the alternative to high immigration would be even higher income taxes as those over 70 will make up a larger share of the population in coming decades (pictured is a stock photo)
The working-age component of the Australian population peaked in 2005-2006, when 48.5 percent of the population paid income tax
Disadvantages of high immigration
Deloitte admitted that a reduction in temporary migration, based on high numbers of international students, would reduce demand for rental properties during a cost of living crisis.
“If the reduction in temporary migration were to materialize, it would likely help to alleviate some of the supply-side pressures that have contributed to problems such as worsening rent and housing affordability,” the report said.
Daniel Wild, deputy director of the Institute of Public Affairs think tank, said high immigration was to blame for Australia’s housing crisis.
‘Migration has and will continue to play a crucial role in our national social fabric and economy, but the inability to properly plan has led directly to housing shortages, rising costs of living for households and has put pressure on our educational , healthcare and welfare systems. ‘ he said.
Deloitte’s ‘Right Sizing The Workforce’ report calculated that the recent wave of immigration meant the country had 693,600 more working-age people than before the pandemic (pictured is a Sydney bartender)
In December there were 17.5 million people between the ages of 15 and 64
The average house price in Sydney rose 12.8 per cent in the year to January to an even more unaffordable $1.395 million, CoreLogic data showed, despite a series of aggressive rate hikes by the Reserve Bank.
This came as house rents in Melbourne rose 17 per cent annually in February to $736 a week, separate figures from SQM Research showed.
Mr Wild said high immigration was a lazy policy solution to tackle skills shortages.
“It is clear that the federal government’s migration program is unplanned, out of control and out of step with community expectations,” he said.
“Furthermore, the country has failed to address Australia’s labor shortage crisis, the very thing the federal government is using to justify such rapid increases in inflows.
“It’s clear that this lazy approach to solving the labor shortage isn’t working and more attention needs to be paid to getting Australian retirees, veterans and students into work.”