b'The role of population in Australias economic growthPrepared by BIS Oxford Economics for the Urban TaskforceMarch 2021Executive Summary ContentsMigration has played a pivotal role inBut if it settles at a permanently lower rate of1. Historical experience of migration 6Australias economic development. Although100,000 (similar to the level in the late 1990s,1.1Trends in total Net Overseas Migration,2000-2020, Australia and NSW 6the composition has changed, compared tobefore reforms were implemented to attract1.2Temporary workers .8other economies inflows have been sustainedskilled workers and international students) the1.3International students .8at very high levels for a number of decades. Asimpact will be pronounced. The growth rate of a result, 30% of the resident population wereGDP would be reduced 0.6%pts, to just 1.3% pa.1.4Permanent migrants 10born overseas, and in the years prior to theThis is equivalent to output being $460bn less in2.Migrations role in Australias economic history .11COVID-19 pandemic Net Overseas Migration2050, when compared to a path consistent with accounts for around 60% of annual populationthe Centre for Populations latest projections. 2.1The evidence for migration driving economic growth 11growth. In addition to underpinning a significant2.2Decomposing the contribution of migrants 14The economic impact of these migration flowsproportion of economic growth, migrants2.2.1Expansion of the labour force 14is substantial. Looking over the last twenty yearsare also a significant net contributor to the2.2.2 Relatively high skill levels and productivity .16alone, and focusing only on the incrementalgovernments fiscal position. The focus of the2.3Estimating the contribution to incremental economic activity .17contribution of new migrants over that timemigration program on relatively young (under (that is, excluding the ongoing contribution40), highly skilled workers results in migrants3.19The role of migration in future economic growth from migrants who arrived prior to this date),typically earning above-average salaries (and3.1Impact of lower migration on the economys capacity 19we estimate that Net Overseas Migration isso paying above-average income tax) and3.1.1Calibrating the impact of lost migration19responsible for over 20% of the increase in therequiring below-average levels of government3.2The trajectory for migration and the economy in the long run .20economys productive capacity in this period,support. The cost of their education has already the equivalent of A$172bn in additional output. been born by their home country, and for4.Contribution to government finances .22And as this estimate does not incorporate thetemporary workers their access to government intertemporal impact of migrants increasingservices while they are in-country is restricted. their economic activity over time eg. childrenOverall, the Treasury estimated that permanent who enter the workforce in the yearsmigrants and temporary workers who arrived in subsequent to their arrival, or the productivityFY15 will contribute an average of $32,450 per increases that are generated by higher- person to the governments fiscal position over than-average skills of new migrants, it is athe 50 years following their arrival in-country conservative estimate of the contribution to- $9.7bn overall. And in more recent work they economic activity.have identified the cumulative loss of migrants Given the clear evidence of the positiveover the COVID-19 pandemic as one of the contribution of migration to Australiaskey reasons for the structural gap between economy, it follows that a permanently lowerexpenditure and revenue that is now present level of migration after the COVID-19 recoveryin government finances. Based on current is complete will be a drag on economic growth.policies, and taking account of the 1.1 million If migration broadly returns to its pre-COVIDloss of people in the population (relative to their5trajectory the impact on the pace of growth inpre-COVID projections), the Treasury are now the long run will be limited.expecting the budget deficit to be 1.6% of GDP in 2030/31.'