Treasury’s migration forecast looks shaky as long-term numbers set to surge
Despite Treasury’s forecast of a migration cooldown, policy settings suggest Australia’s population surge is far from over, writes Dr Abul Rizvi.
TREASURY IS FORECASTING net migration settling long-term at around 230,000 per annum. While this is close to the level pre-pandemic, Treasury is assuming both net migration arrivals and departures will in future be significantly higher than pre-pandemic. Can we rely on this forecast?
This is the biggest immigration and population policy question of all, as it will drive Australia’s long-term population growth rate, levels and age composition. To get a handle on this, we need to consider how and why net migration has changed in the past.
Drivers of net migration in 15 years to COVID
Net migration is driven essentially by two factors: changes to policy settings and the relative strength of the labour market.
The rise in the permanent migration contribution to net migration from 2004-05 to 2008-09 was largely due to an increase in the permanent program from around 120,000 in 2004-05 to around 171,000 in 2008-09. The Howard Government increased the program in response to a tightening labour market with unemployment falling from 5.5% in mid-2004 to 4.0% in mid-2008.
The rise in the student and other temporary entrant contribution to net migration over the same period was also the result of the Howard Government making policy more facilitative in response to the tightening labour market. Opportunities for both students and working holiday makers to extend stay were expanded significantly so that they would add to the labour market.
As manager of migration and temporary entry programs during that period, I was under intense pressure from ministers to address labour shortages that the business community was complaining about. Consequently, net migration increased quickly from around 142,000 in 2004-05 to around 300,000 in 2008-09.
The Global Financial Crisis (GFC) brought that growth to a sharp reversal (in a way somewhat similar to COVID). With unemployment rising to almost 6%, the new Labor Government marginally reduced the permanent migration program (there was a large backlog of onshore applications that had to be dealt with). Nevertheless, the permanent contribution to net migration fell from 82,000 in 2008-09 to around 61,000 in 2010-11. This was mainly due to a higher departure rate as new skilled migrants did not have access to a social safety net at a time when unemployment was rising.
Labor’s main policy response was to tighten student visas and, to a lesser degree, working holidaymaker visas. As a result, the student contribution to net migration fell from 122,000 in 2008-09 to around 25,000 in both 2010-11 and 2011-12. Universities did not complain much about this as the tightening mainly targeted vocational education and training (VET) and English Language Intensive Courses for Overseas Students (ELICOS) sectors.
The working holidaymaker contribution fell from around 24,000 in 2008-09 to around 18,000 in 2009-10.
While the New Zealand citizen contribution to net migration fell briefly in 2009-10, it recovered very quickly to over 44,600 in 2011-12 as Australia’s economy recovered from the GFC comparatively quickly, particularly relative to NZ. The net outflow of Australian citizens fell to below negative 10,000 for a remarkable five successive years as job opportunities for young Australians were better in Australia than overseas.
Having fallen to around 180,000 in 2010-11, net migration recovered to around 230,000 in 2011-12 and 2012-13 with the strengthening labour market and unemployment again falling to around 5%. But with the Abbott Government’s austerity program increasing unemployment to over 6%, net migration fell again in 2013-14 and 2014-15 to around 180,000.
During these years, the NZ contribution to net migration fell to an astonishingly low 4,670 in 2014-15; almost a tenth of what it was in 2011-12, as unemployment in NZ fell sharply compared to rising unemployment in Australia.
The deterioration in the labour market also led to the net outflow of Australian citizens rising to negative 25,880 in 2014-15; a level of Australian citizen outflow never before seen. The Abbott Government was effectively driving Australian and NZ citizens out of the country. At the same time, the Abbott Government kept the permanent migration program at a then record 190,000 and increased the permanent humanitarian program to 22,000 in 2016-17 to respond to the Iraq/Syria crisis.
The Abbott Government also implemented the recommendations of the Knight Review for a more facilitative student visa policy. That led to the student contribution to net migration rising every year from 41,260 in 2012-13 to 112,710 in 2018-19. The stock of students in Australia boomed to well over 600,000. It was only the COVID border closures that temporarily brought that rising trend to a halt.
It was largely student visa policy (and, to a lesser degree, working holidaymaker policy) that led to net migration rising from around 187,000 in 2013-14 to around 240,000 in 2018-19 as Home Affairs Minister Peter Dutton cut both the permanent migration and humanitarian programs and significantly tightened skilled temporary visa policy.
Net migration during COVID and beyond
Closure of international borders, unemployment rising to 7.5% and former PM Scott Morrison telling students and other temporary entrants to go home led to net migration falling to around negative 89,000 in 2020-21. It would have fallen much further if there had not been a very large net inflow of Australian citizens. The permanent migration and humanitarian programs were reduced, although onshore permanent visa grants remained high.
During 2021 and into 2022, unemployment fell steadily to below 4%. There were desperate complaints about labour shortages, with job vacancies rising from 124,500 in May 2020 to over 400,000 by late 2021. That was unprecedented.
The Morrison Government responded with some equally unprecedented policy changes designed to keep students and other temporary entrants in Australia (such as the special COVID visa); enabling students to work unlimited hours; adding new work and holiday visa agreements and increasing the cap by 30%; allowing a third working holidaymaker visa and make student and working holidaymaker visa applications fee free.
With these policies in place, it was no surprise to see student and working holidaymaker visa applications boom as soon as international borders reopened. Offshore student applications in 2022 hit an all-time record of 361,640, beating the pre-pandemic record of 295,037.
Because the new Labor Government significantly delayed tightening the Coalition policies it inherited, offshore student applications continued growing to 440,377 in 2023. These did not begin to fall until the Labor Government made a flurry of changes from the second half of 2023 to bring offshore student applications down to 288,270 in 2024. By far the biggest falls were in the VET and ELICOS sectors.
The student contribution to net migration grew in parallel with the booming student applications and then fell with policy tightening. The same was the case with the working holidaymaker contribution to net migration.
Overall net migration fell from a peak of over 535,000 in 2022-23 to 340,000 in calendar year 2024. Treasury forecasts are for net migration to keep falling in 2025-26 and 2026-27.
Will net migration fall in line with Treasury forecasts?
Treasury is forecasting net migration will fall to a long-term level of around 230,000 per annum and stabilise there. As Treasury is not forecasting a significant deterioration in the labour market, it must be relying on the impact of policy tightening to deliver this outcome.
According to Treasury, the key driver of net migration in 2025-26 and 2026-27 will be a sharp increase in net migration departures, with only a marginal fall in net migration arrivals. The increase in departures depends heavily on how quickly the 2.8 million temporary entrants in Australia depart rather than seek to extend stay or apply for permanent migration.
There is very strong evidence, such as over 360,000 people on bridging visas, a booming student refusal backlog at the Administrative Review Tribunal (A.R.T.) and enormous backlogs for permanent visas, that a large portion of the 2.8 million will continue to apply for further temporary and permanent visas.
Compared to the situation in the years immediately prior to the pandemic, Treasury expects annual net migration arrivals to stabilise at around 60,000 higher and net migration departures to stabilise at over 60,000 higher. To put this forecast into context, we need to compare policy settings pre-pandemic with those that are in place currently.
Overseas students
There is no question current student visa policy settings are tighter than they were pre-pandemic, when the student contribution to net migration was rising strongly. It certainly had not reached a steady state. If not for the COVID border closures, it would have continued to rise. But it is also the case that the International Education industry has become even more reliant on revenue from overseas students and will continue to push for higher levels of recruitment.
While offshore student applications are likely to be lower in 2025 than in 2024, they may remain around the same level as in 2018-19. As the Government has no workable tool to limit student numbers, it is highly likely that the student contribution to net migration will also not fall much below the 2018-19 level of 112,700.
Working holidaymakers
Current working holidaymaker policy is significantly more facilitative than pre-pandemic, including:
- an increase in the minimum age limit for citizens of the UK, Canada, France, Denmark, Ireland and Italy from 30 to 35;
- an automatic three-year visa for citizens of the UK;
- option of a third working holidaymaker visa;
- expansion of the program to new agreement countries, including Greece, Switzerland, Brazil, Mongolia, PNG and India. Negotiations with additional nations are in train; and
- implementation of the new Mobility Arrangement for Talented Early-professionals Scheme (M.A.T.E.S.) visa for Indian nationals with an annual allocation of 3,000 places.
These factors have driven up the stock of working holidaymakers in Australia at end May 2025 to around 215,000 compared to 145,000 at end December 2018, with a steadily rising portion securing second and third working holiday visas. Many of these working holidaymakers will subsequently further extend stay in Australia through the now more streamlined employer sponsorship arrangements and/or permanent residence. This will ensure the working holidaymaker contribution to net migration remains well above pre-pandemic levels, which were around 25,000 per annum.
A long-term working holidaymaker contribution of around 40,000 per annum may be a safe assumption.
Skilled temporary entry
Skilled temporary entry visa policy is also now significantly more facilitative than pre-pandemic.
While the minimum salary requirement has been increased and indexed, the impact of this has been more than offset by:
- a significant broadening of included occupations;
- opening up of more employer-sponsored pathways to permanent migration;
- increased use of Designated Area Migration Agreements with highly concessional visa requirements;
- major new labour agreements (such as aged care); and
- reduction in the skilled work experience requirement down to one year.
These changes have led to a steady rise in the stock of skilled temporary entrants in Australia to over 213,000 at end May 2025, compared with 142,000 in mid-2019. They will ensure the skilled temporary entry contribution to net migration will be significantly higher than the 16,400 in 2018-19 (possibly by around 20,000 per annum if the labour market remains strong) and continue to provide a major stepping stone for temporary graduates through to employer-sponsored permanent residence.
Visitors
From the GFC to the start of COVID, the visitor contribution to net migration steadily increased from 21,490 in 2008-09 to 53,020 in 2018-19 as more and more short-term visitors extended stay. There was a boom in visitors extending stay during COVID, leading to the visitor contribution to net migration rising to 98,900 in 2019-20 before declining to negative 6,740 in 2020-21. Once international borders reopened, the visitor contribution to net migration again ballooned to positive 8,450 in 2021-22; 70,710 in 2022-23 and 68,840 in 2023-24.
Unfortunately, the Department of Home Affairs (DHA) does not publish comprehensive data on the types of visas visitors use to extend stay, but we do know a substantial portion applied for onshore student visas. This avenue has now been closed, so we should see the visitor contribution to net migration decline. It may possibly decline to below the 2018-19 level of 53,020, but it would be surprising if it fell significantly lower. A long-term assumption of around 40,000 would be plausible.
Other temporary entrants
Collectively, the other temporary entrants group makes a negative contribution to net migration. That is because it includes people departing on bridging visas and temporary graduate visas.
In 2009-10, this group contributed negative 11,970 to net migration, rising to negative 19,030 in 2018-19. It was negative 42,610 in 2020-21 as other temporary entrants departed Australia in larger numbers during COVID. They returned in large numbers once international borders reopened and, for the first time in at least 15 years, the other temporary entrants group made a positive contribution to net migration of 15,750 in 2022-23 and positive 1,330 in 2023-24.
A factor contributing to the positive contribution of this group would have been the growing Pacific Australia Labour Mobility (P.A.L.M.) scheme. These visa holders have a very high propensity to extend stay by applying for asylum and thus adding to net migration. This will be a major difference between the current situation and pre-COVID.
While this group will return to making a negative contribution to net migration, the P.A.L.M. scheme will limit this, possibly to around negative 15,000 per annum. Policy change to the temporary graduate visa, limiting those to people under 35 years of age, will marginally limit growth in temporary graduates and thus temporary graduate departures.
Permanent migration
In terms of the permanent migration contribution to net migration, it is notable that the headline permanent migration program number of 185,000 is well above the 160,000 in 2018-19. The 185,000 does not include 3,250 places for the new permanent Pacific Engagement Visa and the new Tuvalu visa that did not exist in 2018-19.
The fact that NZ citizens no longer need to go through the permanent migration program means those approximately 10,000 places now go to other nationalities, effectively expanding the migration program without changing the headline number. At 20,000, the humanitarian program is also larger than in 2018-19.
These differences will mean the permanent migration contribution to net migration will be substantially higher than the 61,590 in 2018-19, possibly by as much as 20,000. Note that the Government is under intense pressure to increase the permanent migration program to accommodate booming demand for partner visas.
NZ citizens
Since international borders reopened, the NZ citizen contribution to net migration increased from 7,440 in 2021-22; 26,270 in 2022-23 and 36,970 in 2023-24. This was the combined function of a very weak NZ labour market and policy change in Australia providing NZ citizens with a direct pathway to Australian citizenship without having to go through a permanent visa phase.
If the Australian labour market remains comparatively strong, we can expect the NZ citizen contribution to net migration to remain strong. It will certainly be substantially higher than the 8,050 contribution in 2018-19. An assumption of 25,000 per annum would seem plausible.
Australian citizens
The opening of international borders led to a sharp increase in the net outflow of Australian citizens, from positive 18,100 in 2020-21; negative 12,930 in 2021-22; negative 30,470 in 2022-23 and negative 24,170 in 2023-24.
In 2018-19, Australian citizens contributed negative 11,760 to net migration. If Australia’s labour market remains strong, it is likely that the Australian citizen contribution to net migration may again settle at around that level.
Conclusion
Overall, that gives a long-term net migration level of around 300,000 rather than the 230,000 Treasury is forecasting.
Dr Abul Rizvi is an Independent Australia columnist and a former Deputy Secretary of the Department of Immigration. You can follow Abul on Twitter @RizviAbul.
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