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Australia is addicted to high immigration so it can have more working-age people to tax as couples have fewer children and the population ages, a government report says.
Treasury has warned the alternative to high immigration would be even higher income taxes, as those over 70 made up a bigger share of the population in coming decades.
The Institute of Public Affairs, a libertarian think tank, calculated a record 31 per cent of Australia’s population was now born overseas – more than double the U.S. level of 15 per cent and the UK’s 14 per cent.
It’s also significantly higher than Canada’s 21 per cent and New Zealand’s 29 per cent.
A record 518,000 migrants, on a net basis, moved to Australia in the 2022-23 financial year. This slowed to 447,790 at the end of last year.
Australia is addicted to high immigration so it can have more working-age people to tax as couples have fewer children and the population ages (pictured is a Sydney train)
But before long-term departures were factored in, almost 1.1million foreigners moved to Australia on a permanent and long-term basis in 2023, Australian Bureau of Statistics data revealed.
Both Deloitte Access Economics and Treasury are expecting Australia’s overseas intake, covering skilled migrants and international students, to slow to 375,000 in 2023-24.
This would still be almost double the pre-pandemic level of 194,400 in 2019-20, before Australia was closed from March 2020 to December 2021.
Immigration boosts labour supply
Deloitte’s ‘Right Sizing The Workforce’ report calculated the recent immigration surge meant the nation was home to 693,600 more working age people than before the pandemic.
In December, there were 17.5million people aged 15 to 64.
‘That strength is due in large part to the rebound in international migration, giving Australia access to young and (in many cases) skilled workers,’ the Deloitte report said.
‘Australia’s population continues to be bolstered 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 nations have fewer children.
Baby boomers retiring
Baby boomers also began to retire in numbers in 2006, when the eldest among them turned 60 and were able to access their superannuation.
The working-age component of Australia’s population peaked in 2005-06, when 48.5 per cent of the population paid income tax and a large generation of Australians was still working.
That dropped below 43 per cent in 2012-13 but climbed back closer to 46 per cent by 2019-20 as net overseas migration edged back above 200,000.
Higher income taxes
Treasury’s Intergenerational Report, released in August, warned the alternative to higher immigration would be higher personal income taxes.
‘As the population ages, the personal income tax base is projected to continue to narrow in line with the projected decline in workforce participation,’ it said.
‘In the absence of policy change, projections show increasing reliance on personal income tax.
‘Taxpayers have declined as a share of the total population since peaking in 2005–06 despite a similar employment-to-population ratio.’
Treasury is still expecting personal income tax receipts to grow from 12 per cent of gross domestic product in 2022-23 to a bit above 14 per cent by 2062-63.
Only 12 per cent of Australians aged 70 and over pay income tax, with this group now making up 12.2 per cent of the total population.
The ranks of the elderly were expected to increase to 18.1 per cent by 2062–63.
Treasury has warned the alternative to high immigration would be even higher income taxes, as those over 70 made up a bigger share of the population in coming decades (pictured is a stock image)
The working-age component of Australia’s population peaked in 2005-06, when 48.5 per cent of the population paid income tax
Downsides of high immigration
Deloitte conceded a reduction in temporary migration, based on high numbers of international students, would reduce demand for rental accommodation during a cost of living crisis.
‘If the reduction in temporary migration were to materialise it would likely help to alleviate some of the supply side pressures that have contributed to issues such as deteriorating rental and housing affordability,’ it said.
Daniel Wild, the deputy executive director of the Institute of Public Affairs think tank, said high immigration was behind Australia’s housing crisis.
‘Migration has and will continue to play a critical role to our national social fabric and economy, but failure to undertake proper planning has directly driven housing shortages, household cost of living increases and has placed pressure on our education, health, and welfare systems,’ he said.
Deloitte’s ‘Right Sizing The Workforce’ report calculated the recent immigration surge meant the nation was home to 693,600 more working age people than before the pandemic (pictured is a Sydney bartender)
In December, there were 17.5million people aged 15 to 64
Sydney’s median house price surged by 12.8 per cent in the year to January to an even more unaffordable $1.395million CoreLogic data showed, despite a series of aggressive Reserve Bank interest rate rises.
This occurred as Melbourne house rents soared by 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 tackling 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.
‘On top of this it has failed to address Australia’s worker shortage crisis, the very thing the federal government uses to justify such rapid increases in intake.
‘It is clear this lazy approach to solving worker shortages is not working and there should be a greater focus of getting Australian pensioners, veterans and students into work.’
