How big should Australia be? Mark Cully on the migration question

Shortly after taking office in late 2007, then prime minister Kevin Rudd met Ken Henry, then the Treasury secretary. Here is a snippet of dialogue from that meeting:¹

Rudd: “Ken, what do you think is Australia’s optimally sustainable population size?”

Henry: —”Probably 15 million, or thereabouts.”

Rudd: “Good. That’s pretty much what I thought, about 50 million.”

Henry: “No, no, I said 15 million.”

Rudd: “Fifteen! I thought you said 50. What do you mean 15? That’s nuts.”

Henry: “Well, prime minister, I don’t think you can argue that human activity on this continent is sustainable, not in any way I think about it, so it needs to be a smaller number than it is now, and 15 seems about right to me.

Had Rudd ever acquainted himself with Henry’s speeches and his recreational pursuits, he might not have been so taken aback.²

Not that he paid much heed to the advice. Two years later, when grilled by Kerry O’Brien on the 7.30 Report about the dramatic increase to the Australian population projected to occur by 2050, Rudd was unrepentant: “I actually think it’s good news that our population is growing … it’s good for us, it’s good for our national security long term, it’s good in terms of what we can sustain as a nation.’

O’Brien’s line of questioning was prompted by a speech Henry had given earlier that day to a business group in Brisbane.³ In it, he gave a preview of some of the material from the upcoming 2010 Intergenerational Report. In the first intergenerational report, in 2002, the projection was that Australia’s population would reach 25 million by 2042. Now, the Treasury was saying the population would shoot past 25 million people two decades earlier and top 35 million by 2050.

The reason the population projections had escalated was that migration was running significantly above assumed levels, and when Rudd appeared that night on the 7.30 Report, net migration had risen to 278,000 people per year. Australia’s population growth rate was among the fastest in the developed world.⁴ Something strange was going on.

Australian politicians and Treasury officials were locked into a framework of thinking about immigration that was hopelessly outdated. They thought net migration levels roughly matched the number of permanent residence visas issued. That relationship was now broken; besides that, it missed the point.

There were now vastly greater two-way migration flows than Australia had ever seen. In the previous five years, over 2 million immigrants had added to the population while just over 1 million emigrants had subtracted from it. As well, most of those arriving weren’t settlers as conventionally understood. They were people availing themselves of the liberalisation in Australia’s migration rules that allowed long-stay temporary residence.

You didn’t need to be a specialist in migration law or statistics to know that something was happening. Australia was teeming with new types of migrants. Australia was riding the crest of a wave of globalisation.

* * *

When the Howard government was elected in 1996, changes began to unfold in quick succession, creating a reset — a “revolution”, some called it — of Australian immigration policy. The Howard government made two sets of fundamental changes to immigration policy that ran in parallel lines, initially independent of one another before they overlapped and became entangled in a gnarly mess.

The first change was to tilt the places available in the annual migration program towards skilled migrants and away from family reunion places. The second was to dramatically liberalise the opportunity for people to come to Australia as temporary migrants with work rights.

Guest workers had begun to creep into Australia from the mid-1990s under the cloak of visas intended for other purposes: working holiday-makers, overseas students and high-skilled temporary workers sponsored by business. It aligned with the mantra of making the labour market more “flexible” — that is, debilitating unions and lowering labour costs — espoused by employer groups and championed by The Australian Financial Review and the Productivity Commission.

A parliamentary inquiry reviewed Australia’s working holiday-maker scheme in 1997 and came to a strong conclusion: “the committee is adamant that it should not be used as a basis for solving labour market problems in Australia”.⁵ The government took the exact opposite position. It began by progressively increasing the annual cap on visas issued and the range of countries from which working holiday-makers could come.

Most consequentially, in 2005, it yielded to the clamour of lobbying by farmers, doubling the maximum duration a visa holder could work for a single employer and allowing a second year-long visa for those who spent at least three months on their first visa doing seasonal work. The type of work that would entitle someone to a second visa was then broadened to include a range of jobs anywhere in regional Australia. By 2010, 120,000 people were in Australia on working holiday visas.

The initial 1990s spurt in overseas students was driven by “immigration for education”: young people seeking to improve their English and gain a qualification that might boost their job prospects back home. What fuelled growth in enrolments from the late 1990s was a series of changes that reversed the equation to “education for immigration”. Step 1: study in Australia. Step 2: acquire permanent residence.⁶

The 1999 changes to the skilled migration points test included bonus points and the automatic conferral of maximum points for proficiency in English for people whose qualifications were obtained in Australia. In 2001, the requirement to apply for permanent residence from outside Australia was removed, allowing overseas students a near-seamless transition to ongoing settlement.

In 2007, a student graduate visa was created, allowing former students an additional 18 months in Australia to bolster their chances of obtaining permanent residence — by finding an employer willing to sponsor them, for instance. The number of overseas students in Australia grew and grew, reaching 400,000 in 2010. Australia had, by a considerable margin, more overseas students as a share of its population than any other country in the world.⁷

It was a former Indian computing student, Neville Roach, who helped open the door to the last significant category of guest workers: temporary sponsored skilled migrants. Information technology companies had become shrill in their complaints that the number of Australian workers familiar with the latest technologies was insufficient to their needs. The education system was too slow to adapt. The immigration system was too cumbersome.

Roach was given the opportunity to solve this logjam when he was appointed by the Keating government to lead a review of the immigration rules for temporary business entrants. His report was sitting in Philip Ruddock’s in-tray when he became immigration minister for the Howard government in 1996.

Ruddock moved quickly to enact its recommendations. A new visa was created (subclass 457 in the migration regulations). This number became the shorthand way of referring to this group of migrants, less of a mouthful than “temporary business (long-stay) migrants”. Employers could use a fast-track process to sponsor foreign workers for up to four years. If the job was for a “key activity” (as specified in the regulations), there was no need to demonstrate that domestic workers were unavailable to fill the job.

Once employer groups saw how easy it was for information technology companies to source workers globally, they lobbied to broaden the scheme and make it less heavily regulated. In 2001, the government obliged. The concept of a specified key activity was disbanded. Employers could now sponsor overseas workers for any of several hundred occupations in the professions and trades, subject to paying them a salary no less than average weekly earnings. No formal labour market testing was required. Employers had only to detail the steps they had taken to attempt to fill the position domestically.

But numbers began to edge up steadily. Questions began to be asked about the number of migrants who came from developing countries, and whether the jobs being filled were genuinely skilled and in short supply. A range of measures to improve “integrity” in the sponsorship process was introduced. But they kept butting up against a tightening labour market, with unemployment falling to 4% of the workforce and skill shortages seemingly endemic. The pressures for openness won over the pressures for greater protection. By 2010, around 130,000 temporary skilled workers were living in Australia.

The situation of so many people of ambiguous migration status — temporary, but not — was a sea change in Australian immigration. Everything was topsy-turvy. By 2000, temporary migration was adding more people to the population than permanent migration. A decade later, it was adding twice as many. Half of all the permanent residence places in the migration program each year were going to people already resident in Australia on a temporary visa. Net migration was running well above the level that demographers thought warranted to moderate the impact of population aging.⁸ Australia had opened itself to the world; everything was fluid: capital, goods, ideas, technologies, services, kilobytes and people, moving in all directions.

* * *

At various moments over the past 200 years, there has been an explicit choice to be made: big or small. Big meant high levels of migration, induced by assisted passage or easy-to-meet visa requirements. Small meant modest levels of migration, enforced by winding back assisted passage and tightening entry to Australia. On most occasions, governments have chosen to go big. Australia is foremost a much more populous country than it would otherwise have been because of these choices.

The record for net migration has been broken three times this century. Migration added at least 1% growth to the population between 2007 and 2009, again in 2012, 2013 and 2017, and in each year since 2022, rising above 2% in 2023. Obfuscating or badly briefed ministers hid behind the rhetorical shield of the “Migration Program” when quizzed about these rising levels. They blustered that they had not increased the program’s size, missing the point entirely: they were supposed to be in charge.

For many types of temporary migrants (overseas students, for instance), there is no cap on the number who can enter. As Australia is a highly desirable place to live and work, it is entirely unsurprising that large numbers of people from developing countries wish to spend some years doing just that, adding more years if they can. Around half of all people who arrive as temporary migrants are still resident in Australia after a decade; most, but not all of them, having acquired permanent residence.

Nothing prevents the government from introducing caps on the number of temporary visas granted each year, as the Canadian government recently did. If that is unpalatable (as it would be to universities and the horticulture and hospitality industries), a limit on the number of years an individual can spend in Australia on temporary visas could be introduced. Without some changes along these lines, the present circumstance of an uncontrolled migration intake and a large and growing volume of temporary residents will persist.

Big or small is a choice, a political and economic one. There is no denying that pressure to keep immigration high will remain immense, as in most rich countries with aging populations. It is still, though, a choice that needs to be actively made rather than sidestepped, with levels allowed to eventuate by default.

This is an extract from Waves of Plenty: Immigration and the Making of Australia by Mark Cully (Black Inc. Books)

[1] The recreated dialogue is based on Ken Henry’s recounting of it on The Joe Walker Podcast on May 10, 2023. Australia’s population at the time the meeting took place was a bit over 21 million people.

[2] Ken Henry was well known as a staunch environmentalist who spent his free time providing refuge for native animals.

[3] Ken Henry, “The Shape of Things to Come: Long-Run Forces Affecting the Australian Economy in Coming Decades”, Address to the Business Leaders Forum, Queensland University of Technology, October 22, 2009.

[4] Australian Bureau of Statistics, “Estimated Resident Population, March 2009”, Dataset, September 22, 2009. The average population growth for OECD countries in 2009 was 0.7%, a third of Australia’s growth rate. Only Israel and Mexico had higher growth rates than Australia.

[5] Joint Standing Committee on Migration, Working Holiday Makers: More Than Tourists, Australian Government Publishing Service, 1997, p. xvi.

[6] Shanthi Robertson, Transnational Student-Migrants and the State: The Education-Migration Nexus, Palgrave Macmillan, 2013.

[7] In absolute terms, only the United States and the United Kingdom had more overseas students.

[8] The initial demographic modelling work that the Howard government relied upon to boost the migration program proposed net migration of the order of 80,000–120,000 people per annum. A decade later, a new round of modelling, also led by Peter McDonald, substantially upped this range to 160,000–210,000, leaning more on its positive impact on living standards than ameliorating population aging. At any rate, net migration ran well above 210,000 in each year between 2007 and 2009, falling back within the revised range in 2010. Peter McDonald and Jeromey Temple, “Immigration, Labour Supply and Per Capita Gross Domestic Product: Australia 2010–2050”, Report prepared for the Department of Immigration and Citizenship, May 2010.