Despite increased local unemployment, the Rudd Government has been advised not bow to pressure to reduce Australia’s permanent immigration intake.

In a report to the Immigration Department, the director of the Australian Demographic and Social Research Institute, Professor Peter McDonald, warned that shortsighted immigration decisions could stifle the nation’s eventual economic recovery.

Immigration Minister Chris Evans recently proposed cuts to the number of foreign workers allowed into the country, in the wake of the global financial crisis, asserting that the Rudd Government is committed to protecting Australian jobs.

In his report, McDonald described the present Australian labour force policy – as reactionary and lacking in long-term planning.

By way of example, MacDonald, pointed to the attempts made to plug labour shortages through training and immigration, mentioning that this approach had resulted in short cycles of under- and over-supply of skilled labour in recent years – particularly in the IT industry.

Commenting on McDonald’s report, Bruce Mills, Joint CEO of 3W Consulting, Contracting & Recruitment Pty Ltd, said: “At least in the short to medium term – that is over the next 20 years – Government must make optimum use of immigration to meet the increasing demand for skilled labour in Australia.”  

“Overseas immigrants are likely to be the key promoters of economic growth over the next 40 years as the ‘baby boomer’ generation heads into retirement, and it would be prudent for Government to keep this in mind when making decisions about intake objectives,” Mills added.

Professor McDonald’s modelling took into account imminent changes in the age structure and the inevitable fall of labour supply in 2020. He reported that no immigration strategy could prevent the labour shortage, but estimated the optimum number of migrants, to maintain a growing economy in the coming decades, to be around 180,000 per year.

Statistics show that record numbers of migrants arrived in Australia last year, and more than 200,000 are expected to enter the country in 2008-09.

The report also pointed out that immigration levels tend to lag behind the economic cycle. The highest levels occur when peak economic activity tips over into recession, but there is often a massive reduction just when more workers are needed to help rebuild the economy.

A look at the figures for previous recession periods bears this out. During the 1974 recession, the net overseas migration was 87,000. This was cut to 13, 500 the following year, but returned to previous levels in 1980. The 1982-83 recession saw net migration fall from 123,000 in 1981 and 103, 000 in 1982, to 55, 000 in 1983. It took six years to return to 1981 levels.

“There is also a long lag-time in the immigration process,” said Mills.  “Targets are set well in advance, and visa grants often take a long time. Also, immigrants may also take many months to actually take up the grants, further slowing the process.”

McDonald’s report warned against letting numbers drop off as drastically as they have in past recessions and advised government to even out the peaks and troughs.

"Migrants provide economic stimulus," said Mills. "They bring money into the country and they spend it to set themselves up, and to buy assets such as cars and houses."

“Naturally, immigrants can create pressure on the existing infrastructure, and housing supply is already a problem in the capital cities, particularly Sydney,” Mills added.

“This is why, as Professor McDonald mentions in his report, it is important for government to plan and co-ordinate Australia's future levels of immigration with a sound policy for urban infrastructure particularly when it comes to housing, transport, water and energy supplies.”