Leading demographer Peter McDonald has warned against short-sighted immigration decisions, saying overseas migrants will be the key drivers of economic growth over the next 40 years as millions of baby boomers move into retirement.
"At present, Australian labour force policy tends to be more a matter of reaction than of long-term planning," Professor McDonald wrote in a report presented to the Immigration Department this week.
"Labour shortages emerge, and attempts are made to plug them through training or immigration. This approach often leads to short cycles of under- and over-supply, as has been evident in the IT industry in recent years.
"In the short to medium term (the next 20 years), immigration is the only means available to meet large aggregate labour demand in Australia."
Professor McDonald, director of the Australian Demographic and Social Research Institute, said immigration levels tended to move behind the economic cycle: highest when peak economic activity tips over into recession, and savagely cut just at the time more workers were needed to help rebuild the economy.
When the 1974 recession hit, net overseas migration was 87,000. The following year it was cut to 13,500 and only returned to 1974 levels in 1980. In the 1982-83 recession, net migration fell from 123,000 in 1981 and 103,000 in 1982 to 55,000 in 1983, only returning to 1981 levels six years later.
"Immigration has a long lag-time," Professor McDonald said. "Targets are set well in advance, visa grants often take a long time, and then the immigrant has many months to actually take up the grant. We shouldn't let the numbers drop off as dramatically as they have in past recessions. We should be evening out the peaks and troughs."
Record numbers of migrants came to Australia last year and more than 200,000 are expected in 2008-09.
Immigration Minister Chris Evans has flagged cuts to the number of foreign workers allowed into the country in the wake of the global financial crisis, saying the Rudd Government is committed to protecting Australian jobs.
Professor McDonald said no immigration strategy could prevent a fall in labour supply in the 2020s as the population aged. His modelling found the optimum number of migrants to maintain a growing economy in coming decades in response to the changes in age structure was about 180,000 a year.
"Migrants do provide their own economic stimulus," Professor McDonald said. "They come into the country with money, they spend it to buy houses and set themselves up."
But immigrants create pressure on existing infrastructure, and housing supply is already a problem in the capital cities, particularly Sydney.
"A plan relating to Australia's future levels of immigration must be co-ordinated with policy for urban infrastructure, especially housing, transport, water and appropriate energy supply," Professor McDonald said.
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