Our perspective

The 2022 Federal Budget in Australia has been delivered in the shadow of a looming federal election.

It comes as no surprise therefore that the budget includes an increase in targeted spending aimed at assisting families and business owners.  This is despite the budget deficit hitting record levels because of COVID-related spending measures over the past 2 years.

The budget did contain some positive news on the budget deficit front, with the net debt level being significantly lower than expected, but the budget is not expected to return to surplus for 10 years.

Effectively managing budget deficits and government net debt over the next 10 years will require strong fiscal discipline including the implementation of productivity-enhancing measures if Australia is to succeed in reaching the forecast reduction.

It’s timely therefore to revisit the role which productivity plays in driving Australia’s economic growth for the future.

In 2002, Ken Henry, Secretary of the Australian Treasury from 2001 to 2011, outlined three supply-side contributors to economic growth known as the ‘Three Ps’:

  • Population – the number of people of working age
  • Participation – the share of those of working age who are willing to work
  • Productivity – the value generated by an hour’s work

This framework now underlies policy thinking in Federal Government in Australia and governments around the world.

Without a doubt, the issue on many business leader’s agenda is how to manage the very real skills shortage crisis.  With most western governments worldwide getting bigger and more expensive, it’s timely to examine how effective the budget will be in addressing a more productive economy.

Summary of immigration changes impacting business

The Government will reinstate Migration Program planning levels to 160,000 in 2022-23.  Net Overseas Migration is expected to increase from 89,000 in 2020-21 to 41,000 in 2021-22, then 180,000 in 2022-23, before increasing to 213,000 people in 2024-25.

Skilled Migration Stream

Skilled stream visas will account for 70% of the program with a total of 109,900 places.  This represents an increase of approximately 30,000 places over the 2021-22 program, with 20,000 of these places resulting from the overall increase in the program and 10,000 redistributed from the partner program.

The Government contends that this redistribution recognises the sharp fall in the number of on-hand Partner visa applications and will further support the economic recovery by increasing the places available for skilled visa holders.

Skilled Stream Planning levels

Visa stream 2022-23 2021-22
Employer sponsored 30,000 22,000
Skilled Independent 16,652 6,500
State and Territory Nominated 20,000 11,200
Regional visas 25,000 11,200
Business and Innovation and Investment 9,500 13,500
Global Talent 8,488 15,000
Distinguished Talent 300 200
Total 109,900 79,600

Global Talent Visa Program

The Government will provide $19.5 million over 2 years from 2022-23 to continue the Global Business Talent and Investment Taskforce, as the renamed Global Australia Taskforce, to attract talented individuals and international investment to Australia.  This is an important initiative for the business community in Australia and has become a popular avenue to attract senior executive and specialist skills talent from targeted markets overseas.

Skilling Australians Fund (SAF) Levy

The SAF Levy is a charge imposed on businesses which sponsor overseas foreign talent under certain visa categories such as the Temporary Skill Shortage (subclass 482) visa.  The premise behind the levy was to help fund the local training of occupations in demand, to ultimately increase the local pipeline of skilled talent and reduce the reliance on overseas labour.

Although the Budget papers do not specifically report the amount collected with the SAF Levy, $127 million has been allocated from the Fund for training for occupations in high demand that rely on skilled migration, future growth industries, rural and regional areas, and with a strong focus on apprenticeships and traineeships.

Work & Holiday Visa (WHM) Program

The WHM program has become a valuable option for many businesses seeking to fill skilled vacancies on a short-term basis.  WHM places will increase by 11,000 (30%) in 2022-23.  WHM visa holders who arrive in Australia between 19 January 2022 and 19 April 2022 will be eligible for a refund of the Visa Application Charge (VAC).

Other Initiatives

The Budget included a commitment to bring an additional 12,500 workers to Australia to support the Pacific Australia Labour Mobility scheme, and the creation of the Australian Agriculture Visa, which will be a stream of the Temporary Work (International Relations) subclass403 visa.  This is a recognition that the labour shortages being experienced by business in Australia extend across multiple industry sectors and include semi and unskilled labour.

Immigration commentary

The Australian Government has attempted to reset the immigration program in the post-COVID world.  Some progress has been made, but more needs to be done.

Most of the Australian community is still feeling the effects of the “sugar hit” from the massive COVID related stimulus spending over the past two years.

Whilst the COVID related spending by the Australian Government was generally well-targeted and helped to keep many Australian businesses open and people in employment, it has not addressed the underlying structural immigration challenges which Australia will face for the foreseeable future.

In this regard, it is critical to understand why business in Australia is struggling to find labour – skilled and unskilled.

For many years immigration has been the “sugar hit” that the business community has turned to in times of skill shortage challenges.

Yet again, it seems that the Australian Government will look to deliver skilled labour support to the business community via expanded and more targeted immigration programs.

However, COVID-19 and the massive transformative changes inflicted on the workplace and the workforce over the past 2 years, mean that a heavy reliance on immigration at the expense of initiatives to improve and invest in initiatives to boost local productivity will likely make Australia a less competitive nation.

Bear in mind that Australia is yet to feel the full impact of the loss of skilled Australian talent which was repatriated to Australia during the global COVID lockdowns of the past 2 years.

Eventually, this skilled cohort will look to resume their careers in overseas markets, and this will exacerbate an already significant labour shortage for Australian business.

Addressing this challenge will require brave policy decisions and innovative thinking from both government and business.

In this regard, the Australian Government can look to leverage our natural advantages such as our highly attractive education sector and the abundant pipeline of student graduates to deliver a clear pathway for this cohort to permanent residence.

Additionally, the Australian Government should consider suspending the restriction preventing occupations listed on the Short-Term Occupation Stream of the Temporary Skill Shortage (subclass 482) visa from applying for permanent residence in Australia.

Want to learn more?

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