Speech to the Business Council of Australia
Melbourne, 7 August 2018
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Thank you for the opportunity to address the Business Council of Australia today on skilled migration.
This is a topic in which the business community has a very significant interest, as skilled migrants provide important parts of its workforce, bring innovation from overseas, and fill gaps which businesses can't fill from within Australia.
Of course, skilled migration is also vital for Australia as a nation - it is built on it.
I want to outline today the direction the Government is taking in relation to skilled migration and address some of the issues that business leaders have raised with me since taking over responsibility for skilled migration last Christmas (working closely with Minister Dutton, Minister Cash and the Prime Minister).
My message today is that regardless of the level of migration, Australia is always seeking the best and brightest from around the world to come to our shores. I want to explain how we are doing this and how we are addressing emerging challenges.
The case for skilled migrants
Let me start, however, by addressing the fundamental question: why do we need skilled migration? It is important to recap on this given the discussion about congestion and population growth in our big capital cities.
There are several reasons.
First, skilled migration underpins economic growth. An increase in population of one per cent will correlate to an increase in GDP by about the same amount. In recent years, migration makes up over half of the population growth and skilled migration is 70 per cent of our permanent migration program.
Of course, with a larger economy, there is more scope for investment in public goods, including national defence. It is much easier to pay for 12 submarines with a $1.5 trillion dollar economy than one half the size.
While national GDP growth is desirable, GDP growth per capita is also critical as GDP per capita is a measure of personal wealth. The Productivity Commission analysed this and concluded that GDP per capita also grows marginally with migration growth. It estimates that GDP per capita will grow an additional 7 per cent by 2060 on current migration trends. This is not a huge amount, but nor is it insignificant.
It also stands to reason that the higher the skills coming into the country, the higher the impact on GDP per capita. This has been one of the primary reasons that Australia has increasingly emphasised skilled migration over other forms of migration. This big shift occurred at the beginning of the Howard era and continues under the Turnbull Government.
Second, skilled migrants also contribute more in tax than they take out, particularly when they arrive at a younger age. That is, they help pay for the services that other Australians need and desire.
The estimated median income tax paid by primary skilled migrants was 80 per cent higher tax paying Australians in general (according to the Productivity Commission). When we can get even higher skilled migrants, that figure increases further. We recently reduced the age threshold for skilled migrants to be 45 years, precisely for the reason that this is about the tipping point for a skilled migrant shifting from being a net tax contributor over their lifetime to being a net taker.
We are also tightening the rules further to ensure that there is a very clear expectation that migrants should contribute when they first arrive and not go onto welfare. We are doing this through extending the wait period to access welfare benefits from two years to four years. This is in the Parliament presently.
Third, skilled migrants enable us to fill gaps that we simply cannot accommodate in Australia. For example, many aged care nurses have come in as skilled migrants. If we didn't have them, local residents would struggle to get the care that they require and deserve.
The labour market is now getting very tight in Australia, particularly in many regional areas. If labour gaps are not filled, then services are not optimised, wealth is not generated and inflation is more likely.
Bringing in talented labour also obviously offers tremendous skills transfer to Australians and can foster innovation.
The case for further skilled migration is strong, but this does not translate to meaning that the more skilled migrants the better. There is a balance to be made.
The Productivity Commission documents this well in its Migrant Intake into Australia report. It notes the impact on house and land prices, on shared utilities, and congestion. In addition to this, if migration is not managed carefully, it can lead to social fragmentation and heightened security issues. I have been discussing this at length this year.
It is important for business leaders to understand these other factors as much as the benefits which skilled migration brings. Faster population growth may help their bottom line, but it is the broader community that pays for much of the congestion and pressures on social cohesion.
The Government has to carefully weigh these factors, as we do each year when setting planning levels.
I will come back to this towards the end of my remarks.
What is not in dispute, however, is that within the planning levels set, we should always be aiming to continually improve the quality of our intake. We want the best and brightest from the around the world. We need to not just be open to facilitating skilled migrants coming here, but in the case of the global super talent, actively seeking them out.
A national recruitment exercise
So what are we doing to achieve this?
The Prime Minister refers to our migration system as effectively a national recruitment exercise. This formulation is a clever way of capturing our overall approach.
It actually starts with having strong borders. Some of you will be surprised with me saying this, but in some respects it is a statement of the obvious: we can only recruit the people we want if we control the process. If people smugglers are in control of the process, we are clearly not maximising the recruitment outcomes for the benefit of Australia. Moreover, when migration is orderly, there is more public support for it. Polling over years has shown this.
Some senior business leaders have expressed concern that the only message that they say is heard internationally is that we are closed for migrants. We are absolutely closed for the people smuggling business but we remain open to orderly skilled migration. These two things are not at odds; to the contrary, strong borders supports skilled migration.
Second, we have transformed the major elements of the skilled migration settings. In doing so, we are guided by three principles:
1. Ensuring that Australians have first priority for available jobs:
2. When Australians aren't available, supporting businesses to fill the gaps with people from overseas; and
3. Ensuring there is integrity in the system.
The business community naturally focuses on the second point - ensuring businesses can fill skill gaps - but all three are essential to maintaining public confidence in our system. Hence, as business leaders, you should be just as concerned with the first and third as the second point, because if Australians aren't being prioritised or if there is poor integrity, then the system becomes unsustainable.
The most substantial change the government has made in keeping with these principles has been the shift in orientation of the skilled migration program from focusing on skill level, to focusing on labour market shortage.
This has been done most visibly through the abolition of the 457 visa class and replacement with the Temporary Skilled Shortage Visa. The focus is now on allowing businesses to sponsor people in areas of demonstrated labour shortage. Sometimes the shortages are short term, knowing that Australians can be trained up quickly, while other times they are likely to be longer term shortages. The TSS visa and the associated pathways to permanent residency reflect this.
Some business leaders still raise concerns about the abolition of the 457, but I ask them to reflect back on those three principles I articulated. The 457 visa began to have serious integrity problems under the former government and it wasn't clear that Australians were always being prioritised. Hence, we saw 457s been given for burger flipping at fast food chains. Numbers of 457s granted blew out to a record 130,000 in 2012 on Bill Shorten's watch despite a decline in overall job numbers in Australia and welfare queues ballooning out.
We brought this to an end.
The challenge now is to ensure our skill-shortage lists remain accurate and relevant to business needs, so that they can genuinely and quickly fill labour gaps when there are demonstrably no Australians available.
The Government, led by the Department of Employment, uses the best available data to construct these lists and incorporates input by industry and other stakeholders. I will soon be announcing the updated lists.
But no analysis can perfectly capture skills shortages across the nation. Further, jobs are changing rapidly and cannot always be neatly classified as they perhaps used to in a less digitally-disruptive time.
Hence, we get feedback from some industries that they still struggle to get workers despite making very significant efforts to find Australians. We find some regions have shortages in certain areas where there aren't shortages at a national level. We find that some roles are so specific that they will never be on a national skills shortage list regardless of its length. In Far North Queensland, for example, there is a desperate shortage of Chinese-speaking scuba diving instructors to cater for the booming number of Chinese tourists coming to Australia. That job is never going to be on the skills lists!
Perhaps most pressingly, with digital disruption to almost every industry, there is a global war for the high-end talent and we need to ensure our visas support this.
We are therefore complementing the national and regional skills lists with a number of other more bespoke arrangements.
For example, we are using labour agreements at a company and industry-wide level. Labour agreements are effectively customised arrangements negotiated directly by a business or industry with the Department of Home Affairs. A business case must underpin an agreement, but it allows customised settings for individual companies and industries. There are now over 300 of these in place. These will always require some work to negotiate, but we are endeavouring to make the process as seamless as possible.
We are now extending this concept to a regional level through what is called a Designated Area Migration Agreement. That is, entering boutique arrangement with business leaders in a defined geographical region when the region clearly has requirements which are different to the national ones. Far North Queensland is a good example, as is the Western Australian Goldfields. These negotiated agreements will cover all industries and positions where there are identified and proven shortages.
Finally, we are piloting a new way of getting the high end global talent to Australia. As the Prime Minister frequently says, we are in a war for talent against other nations. Australia will always remain an attractive destination for people because of the liability of our cities, but the high end talent have world-wide choice. We need to make it as simple as possible for them to make Australia their home.
The Global Talent Scheme, which Michaelia Cash and I launched earlier this year, should do this. For high end executives, there is significant flexibility for business recruitment of overseas talent, as the visa criteria is defined largely by salary, not position description. Effectively, if a business cannot find an Australian and is willing to pay someone over $145,000 per annum, then they will be able to sponsor them into Australia. The rationale is that it is highly likely that the person will be an enormous asset to Australia if a business is willing to pay that sort of money.
There is also a stream within the Global Talent Scheme for start-ups seeking tech and digitally savvy workers, who are in high global demand.
In addition to enabling employers to more easily compete for global talent, employers have asked me whether the Government can do more to attract the best and brightest into Australia. The Government is looking into this and how we can leverage our global resources to do more to promote Australia to the individuals who would be economic multipliers for the nation.
From a process perspective, we are also making it faster for skilled visa applications to be assessed and approved. Businesses with shortages need people now, not in 12 months' time!
The most recent figures show that 90 percent of TSS visas are processed in less than 64 days. Compare this to the processing times of 457s which was over a year.
At the same time, we are exploring how to completely transform our visa processing capabilities. Our ancient systems are creaking and not suited to meet the enormous growth forecast over the next decade.
Where to from here?
As outlined above, the government is conscious of the needs for business to fill skill gaps so that they can continue to grow. We are conscious of the global talent war and want to ensure that we continue to get the best and brightest.
The labour market is very tight at the moment - a good problem to have! The government has underpinned the creation of over a million jobs since coming to office. The Australian economy has seen more jobs created in the last financial year than in any time since 2005 under John Howard.
We thank business for their efforts — backed by our plan for a stronger economy. But we know that there are now pressures in key areas.
We will continue to engage closely with business to refine our settings.
The area of the skilled migration stream which is performing the least well is the independent general skilled migration stream. This is when people come to Australia independently through the points system. We are not always consistently attracting the "best and brightest" through this scheme. For example, those coming from offshore have a 22 percent unemployment rate after 6 months. The onshore applicants' unemployment rate is lower at 7.8 percent, but still not satisfactory. The figures improve considerably after 18 months, but never reach the employer sponsored rate. Further, 37 percent of those who had onshore applications are in low semi-skilled jobs after 6 months.
To counter this, on 1 July, we restored the points test threshold to 65, up from 60. But we are looking further at the General Skilled Migration stream to improve the quality of the intake.
We will also continue to examine the Productivity Commission report for further guidance.
Let me finally make some comments about population pressures as a discussion on skilled migration cannot be divorced from this, particularly as today coincides with when the statisticians say we will hit 25 million people.
Population growth is not a one dimensional issue. Rather, it involves size and distribution. If the population was distributed more evenly, there would not be the congestion pressures that we have today in Melbourne and Sydney. (Nor would there be if the infrastructure was built ahead of demand, which I will come to).
However, at the moment, nearly all the migration is to our two largest cities. Last financial year, there were 162,000 permanent migrants but all but only a small proportion settle outside of Melbourne and Sydney.
Of the more than 111,000 skilled migrants who arrived, only 13 percent will settle outside the two large capitals.
Meanwhile, we have other parts of Australia wanting more people. South Australian Premier Steven Marshall, for example, has said that they would like an additional about 15,000 migrants a year.
I have regional mayors telling me that want hundreds more in their area. The Warrnambool Standard in western Victoria recently had as their front page headline: "Wanted - 1,000 workers".
Much of the migration in Melbourne and Sydney is demand driven. That is, they are sponsored by employers with jobs or the person that they are partnered with is Melbourne or Sydney based.
However, there is also significant discretionary migration which is not demand driven. We want to work with people like the South Australian Premier to make growth faster in his state and take some pressure off Melbourne and Sydney.
It is also important to point out that when governments neglect infrastructure — as New South Wales Labor did for 16 years — you will inevitably get congestion problems. Premier Carr famously said that "Sydney is closed" which was an excuse to doze off and not build the roads and rail needed.
Here in Victoria, we have had a state government spend more than a billion dollars not to build a critical road - the East West Link. And why has it taken so long to build the Tullamarine Rail?
Governments need to build infrastructure ahead of the demand for it, not years later. The Turnbull Government is now investing record amounts in infrastructure - $75 billion - to support state governments to do exactly this. The O'Farrell, Baird and Berejiklian governments now have infrastructure projects across Sydney, many with huge funding contributions from our government. A Guy Government would match this energy.
Australia has been built on migration. Successive waves of migrants have come to our shores, help build our economy and made Australia the greatest multicultural nation on earth.
The journey, however, is never complete. We need to continue to work to constantly improve the quality of our skilled migration intake. We need to always ensure that we are selecting the right people and that there are high expectations of integration upon new arrivals and policies to support that.
The Turnbull Government has worked hard on these things and we will continue to do so. Our commitment to the business community is that we will continue to engage with you. And our message to the elite talent around the world is: we want you and invite you to make Australia your home!