Treasury will likely need to increase its net migration forecast for 2024-25, which may set the scene for a Peter Dutton-style, immigration-focused election, writes Dr Abul Rizvi.
WE NOW HAVE DATA for the first two months of 2024-25 on net permanent and long-term (NPLT) movements, changes in the number of temporary entrants in Australia, and student visa applications and grants.
We also have arrivals and departures data up to September 2024, as well as more details on the most recent Treasury forecast for net migration. These things can give a very good indication of whether things are on track to hit the Treasury forecast to reduce net migration in 2024-25 to 260,000.
We can be confident Treasury blew well past its upwardly revised net migration forecast for 2023-24 of 395,000. The ABS’ preliminary estimate of net migration for just the first three quarters of 2023-24 was 392,102, comprising 548,500 arrivals and 160,300 departures.
If we add NPLT movements for the June quarter of 2023-24 of 71,340, that comes to an estimated net migration for 2023-24 of around 463,000. That Treasury’s net migration forecast for 2023-24 was in deep trouble was clear from the first month of 2023-24 NPLT data at 72,770.
The ABS will publish its preliminary estimate on net migration for 2023-24 around early December. Treasury will publish its updated forecasts for net migration in 2024-25 and forward years around the same time. That will cause a political ruckus given the Coalition’s commitment to reduce net migration to 160,000.
Net migration in 2024-25
Treasury’s net migration forecast for 2024-25 of 260,000 is over 42% or around 200,000 lower than the likely outcome for 2023-24. A massive reduction over just one year, the size of which Australia has never before experienced outside the COVID-19 pandemic. It requires a huge reduction in arrivals and a major increase in departures over a very short period. Can that really be achieved?
Source: Treasury evidence to Senate Hearings on 2 October 2024
NPLT movements in July 2024 were 66,780 compared to 72,770 in July 2023 (a reduction of only around 8%). In August 2024, NPLT movements were 23,780 compared to 34,260 in August 2023. A reduction over the two months of 16,470 or 15%. Things are not off to a good start if net migration is to be reduced in 2024-25 by over 42%.
But let’s have a look at the different components of net migration to see how things may turn out at a more detailed level.
Students
The biggest driver of net migration is students. Treasury forecasts for the student contribution to net migration are in Table 2.
The apparent number of student visa holders in Australia increased during 2023-24 by only around 40,000. But that is misleading because the bridging visa backlog increased by around 120,000 in 2023-24. The bulk of this increase is likely to have been onshore applicants for student visas. That would have reduced student departures.
The net movement of students (both short-term and long-term) in 2023-24 was 132,000 compared to 253,000 in 2022-23.
That suggests Treasury’s forecast of the student contribution to net migration in 2023-24 of 185,000 may have been about right or even a slight overestimate. That is predominantly due to the large number of measures taken since 1 July 2023 to tighten student visa policy.
But what of 2024-25?
In the first two months of 2024-25, the number of students in Australia increased by over 70,000. A large portion of these would count towards net migration as they would be new arrivals likely to stay long-term. In the three month period July to September 2023, the number of students in Australia increased by around 96,000. So can we assume a small decline in the student contribution to net migration to this stage of 2024-25?
Well no. In the two-month period of July to August 2024, the number of bridging visa holders increased by an astonishing 26,000. It is highly likely a substantial portion of that increase was onshore applicants for student visas given the unprecedented boom in onshore student applications. In the three months of July to September 2023, the number of bridging visa holders increased by only around 14,000.
Thus the student contribution to net migration may not fall very much, if at all, in the first quarter of 2024-25 compared to the first quarter of 2023-24.
That should be worrying Treasury forecasters, as will indications that the Minister for Education is pressing for student visa policy to be loosened. For example, implementation of revised evidence levels for student visas that would have further tightened visa processing policy has already been postponed and the student visa caps may be increased if we are to go by the evidence given to the Senate by the Education Secretary.
The student caps for 2025 have been set at this stage at 270,000 for just higher education and VET students. That does not include students in other long-term stay student visa streams such as:
- schools (8,253 primary offshore visa grants in 2023-24);
- post-graduate research students (5,565 primary offshore visa grants in 2023-24);
- government-sponsored students (3,452 primary offshore visa grants in 2023-24); and
- others (eg students from Pacific Island nations).
When the above cap exempt categories are added, new long-term students would be close to 290,000 primary visa holders in 2025.
The student caps also exempt non-award students (17,426 primary offshore visa grants in 2023-24) and ELICOS students (29,007 primary offshore visa grants in 2023-24) who may enter initially on a short-term visa and then extend their stay, but they would mostly be within the caps for higher education and VET.
As the student caps relate only to primary applicants, secondary applicants who receive a visa are also in addition to the cap. On average, secondary visa holders add another 10% to 15% to the number of primary applicants granted a student visa. The student contribution to net migration, as with all visa types, includes both primary and secondary applicants.
There are then questions around behaviour including:
- What portion of capped students (higher education and VET) will remain long-term? It is highly likely this may be around 90%.
- Will education providers try to avoid caps in 2025 by increasing offshore lodgements in the next few months to get these finalised in 2024?
- Will education providers try to hit their caps as quickly as possible? This would also help to put increased pressure on the Education Department to increase caps in 2025 and 2026.
- Will education providers become increasingly creative in finding ways to avoid the caps (for example, converting masters by coursework programs to masters by research programs) and create disincentives for overseas students who want to leave providers early?
Overall, if the student caps (plus long-stay exempt categories) are delivered, it is highly likely net migration student arrivals in 2024-25 would rise significantly, rather than fall to 195,000, as Treasury has forecast. If student caps at current levels are to be made the dominant driver of students who receive a visa, the student contribution to net migration will remain well above pre-pandemic levels and well above Treasury forecasts for 2024-25.
If we accept the Treasury forecast for student departures contributing to net migration rising to 70,000 in 2024-25 (there is no detail on how Treasury came to this forecast), the student contribution to net migration in 2024-25 would be well over 200,000 rather than the forecast of 130,000.
It would also mean ongoing growth in the number of students and former students in immigration limbo. That may not be worrying the Education Department or the International Education industry but it will be worrying the Department of Home Affairs (DHA) as these people will increasingly hit a visa brick wall over the next few years. While many will depart, a substantial number will keep looking for ways to extend stays, including applications for asylum or applications for partner visas (contrived or genuine).
Other temporary visas
Treasury aggregates all temporary visas other than students into a single forecast. This aggregation makes it difficult to assess the veracity of Treasury’s forecasts. We don’t know if Treasury puts together these forecasts bottom-up by looking at each individual visa category or whether it takes a top-down approach that largely ignores what is happening with individual visas and the associated visa policies. I suspect mainly the latter.
The largest temporary visas in this group include temporary graduates, working holidaymakers, visitors extending their stay, skilled temporary entrants and bridging visa holders.
Treasury is forecasting that the net migration contribution of the combination of these temporary visas will decline sharply from 210,000 in 2022-23 to 70,000 in 2024-25. We have no details on how Treasury arrived at this forecast but it is likely Treasury is assuming a sharp increase in departures of temporary graduates and COVID visa holders, a significant decline in visitors extending their stay, and a reduced number of asylum applications.
This group also includes people on bridging visas whose substantive applications are refused at either the primary or appeal stages and then depart Australia or go underground (these will be mainly applicants for onshore student visas or asylum). Treasury is likely to have assumed this group will also rise strongly.
It should be noted that over the last decade, governments have made a plethora of visa changes that have generally built in upward momentum into net migration. It is not clear how Treasury has treated these changes in its forecasts but if Treasury considers the long-term net migration contribution of these temporary visas will fall to 65,000 per annum, it must be anticipating very significant policy tightening that the Government has not yet announced. But that would be contrary to the way Treasury usually makes its forecasts.
Temporary graduates
Traditionally, temporary graduates make a negative contribution to net migration as they are students who have already been counted as a net migration arrival and are counted as a net migration departure when/if they leave. Temporary graduates who secure a permanent visa or a skilled temporary visa help reduce the number of temporary graduates in Australia but do not count as a net migration departure.
The number of temporary graduates in Australia increased by around 7,000 in July/August 2024 compared to a decline of 6,000 in July/September 2023. That suggests more students are securing a temporary graduate visa (a large number of applicants for a temporary graduate visa would also be in the bridging visa backlog) and not enough temporary graduates are either departing or securing permanent residence or a skilled temporary visa.
On current policy settings, the rate at which temporary graduates secure permanent visas is unlikely to increase. DHA has clearly signalled it has more than enough former students who did business or IT courses applying for skilled independent visas than it needs. In 2023-24, DHA increased the portion of permanent visas from offshore rather than onshore. In addition, DHA now has a huge and growing backlog of partner visa applications that it legally must accommodate. If those trends continue, permanent residence opportunities for temporary graduates will shrink further.
The rising number of temporary graduate visa holders in Australia, already at a record 223,961 at end August (plus those in the bridging visa backlog) and growing steadily, will increase the number of former students in immigration limbo.
A growing number of temporary graduate visa holders will hit a visa brick wall from 2025, as they will run out of options for extending their stay (policy now prevents them from returning to a student visa). What they do will be crucial for net migration, and migration policy more generally, if large numbers decide they have no other option than to apply for asylum or a contrived partner application. Treasury forecasts suggest it expects large numbers to depart in 2024-25. That may be a triumph of hope over reality.
At present, there are approximately 1.1 million students and former students in Australia on a range of temporary visas (including bridging visas). How far the Government is prepared to let this number grow is a crucial policy question. It is one that will be worrying the Immigration Minister much more than the Education Minister or the international education industry. But it is one that desperately needs to be put to ministers and Treasury net migration forecasters.
Visitors
There has been a significant tightening of policy on visitors extending stays, so the contribution of this group to net migration in 2024-25 should be less than in 2023-24, especially as visitors can no longer apply for onshore student visas and DHA has significantly increased use of the ‘no further stay’ condition on visitor visas.
Nevertheless, visitors more generally continue to apply for asylum at a rate of around 1,500 per month, as well as visitors who apply for other (non-student) onshore visas. They will continue to count as net migration arrivals.
DHA would do well to get the visitor contribution to net migration below 35,000 per annum as it appears to be trying to do. The level in the three years prior to the pandemic averaged around 55,000 and in 2022-23 it was over 88,000. The visitor contribution to net migration has not been below 35,000 since 2013-14 when the unemployment rate increased to over 6%.
Working holiday makers (WHM)
The number of WHMs in Australia fell by around 2,000 in July/August 2024 compared to an increase of 7,000 in July/August 2023. The surge in WHMs in Australia in 2023-24 was driven by a combination of Coalition-era policy, encouraging more WHMs (such as giving UK WHMs an automatic three-year visa; increasing the minimum age for WHMs from the UK to 35; fee-free WHMs; providing the opportunity for a third WHM and increasing caps on Work and Holiday visas by 30%) and a strong labour market.
In addition, the Labor Government has introduced a new Work and Holiday visa for Indian nationals with an initial 1,000 places.
In the three years prior to the pandemic, the contribution of WHMs to net migration averaged around 26,000 per annum. Over the past decade, governments have introduced a range of new Work and Holiday visa agreements that have increased the underlying contribution of this group to net migration, including since the pandemic.
In 2022-23, WHMs contributed 70,848 to net migration. That will have fallen in 2023-24 as the 30% increase in Work and Holiday visa caps introduced by the Coalition for 2022-23 expired. The stock of WHMs in Australia in 2023-24 increased by around 36,000. Without significant policy tightening or a much weaker labour market, it would be difficult to see the WHMs contribution to net migration in 2024-25 falling to much below 30,000.
Skilled temporary entrants
The number of skilled temporary entrants in Australia has been steadily increasing since the pandemic and now stands at 178,416 compared to 94,573 in June 2022. In 2023-24, the number of skilled temporary entrants in Australia increased by around 49,000 and a further 10,000 in July/August 2024. The net movement (short-term and long-term) of skilled temporary entrants in the first three months of 2024-25 was positive 10,790.
In 2023-24, there were 101,533 skilled temporary visas granted of which 61,803 were to people who were offshore and 39,730 to onshore people.
That means:
- skilled temporary entry arrivals remain very high and show no sign of declining in 2024-25; and
- not enough temporary graduates are securing skilled temporary visas to slow the growth in temporary graduates, let alone start reducing the number of temporary graduates in Australia.
In the three years prior to the pandemic, skilled temporary entry contribution to net migration averaged around 16,000 per annum. In 2022-23, these contributed 43,450 to net migration when there were 67,459 offshore skilled temporary visa grants.
DHA is anticipating a larger number of skilled temporary entrants to secure employer-sponsored permanent visas in 2024-25 than in 2023-24. That would reduce net migration departures of skilled temporary entrants and thus increase their contribution to net migration.
While there has been a range of policy changes to skilled temporary entry visas in the last two years (both tightening and facilitating), it is likely the contribution of these visas to net migration will be higher than the three years prior to the pandemic as long as the labour market remains strong (ie more than 16,000 and likely closer to 20,000 or more).
Other temporary visas
The other temporary employment group of visa holders in Australia increased by around 30,000 in July/September 2023 compared to a fall of around 24,000 in July/August 2024. The first quarter of 2023-24 was when there was a massive surge in COVID visa applicants securing COVID visas while the first quarter of 2024-25 reflects these COVID visa holders either departing or more likely applying for other onshore visas, including student visas (ie a large number may be in the bridging visa backlog).
Sub-class 408 visa holders, which includes the COVID visa stream, increased by around 27,000 in July/September 2023 while this fell by 24,000 in July/August 2024 to 53,935. The government forecast of a fall in net migration will rely on a significant portion of this 53,935 departing in 2024-25 (and hence counting as a net migration departure) rather than applying for student visas.
The other temporary group also includes Pacific Australia Labour Mobility (PALM) visa holders. The number of these in Australia has remained relatively stable since July 2023 although they continue to contribute to net migration because a sizeable number apply every month for asylum. The number of PALM visa holders in Australia is net of those who apply for asylum as they quickly move onto bridging visas.
The other temporary group also includes people who apply for onshore visas and are on a bridging visa because of the length of time it takes to process their applications. These will be dominated by applicants for onshore student visas, temporary graduate visas, partner visas or onshore asylum. It would be reasonable for Treasury to assume numbers in this group will rise strongly over the next few years. Because of the paucity of publicly available data on this group, it is difficult to estimate what Treasury has assumed for this group.
An assumption of 5,000 to 10,000 in 2024-25 may be reasonable, almost all of whom would be counted as net migration departures. These would contribute towards the 130,000 other temporary net migration departures Treasury has forecast in 2024-25.
Permanent visas
Treasury has forecast the net migration contribution of people on permanent visas in both 2023-24 and 2024-25 at 65,000. Note that in recent years, over 65% of the permanent migration program has been delivered through people who are onshore and have already been counted in net migration. Hence the net migration contribution of permanent visa holders is well below the headline number for the permanent migration program.
In the three years prior to the pandemic, the net migration contribution of permanent visa holders was:
- 85,250 in 2016-17 when the permanent program was 190,000;
- 67,300 when the permanent program was less than 170,000; and
- 61,590 when the permanent program was 160,000.
The permanent migration program in 2024-25 has been set at 185,000 compared to 190,000 in 2023-24. But for no rational reason, the 2024-25 permanent migration program does not include 3,000 permanent visa places for the new Pacific Engagement Visa (PEV) that starts this year. Most of the PEV will be delivered through people who are offshore and hence will add to net migration.
It should also be noted that as NZ citizens no longer need to apply for permanent residence to acquire Australian citizenship, the migration program has effectively been increased by around 10,000 per annum without this appearing to be the case in the headline number.
In addition, DHA appears to have shifted the balance of the migration program towards offshore visas with only 61% of the program delivered via onshore visas. This is likely to be a long-term shift due to the tightening of policy on visitors applying for onshore visas as well as a shift in occupations targeted in the skill stream away from those traditionally undertaken by overseas students.
A further issue will be the rising backlog of partner visas which will have to soon be addressed as the Migration Act does not permit the government to restrict partner visas. The partner visa application rate will remain strong and it appears the Government has not taken this into account in setting the 2024-25 migration program (or decided it is more politically expedient to ignore it).
Note this would be even more of an issue for the Coalition’s ability to implement its announced policy of reducing the migration program to 140,000 with one-third of that in the family stream. The Coalition would need to secure a highly controversial legislative change to give it the power to cap partner visas. Parliament has twice rejected giving the government that power. There is no evidence the Coalition has considered this in deciding on its announced immigration policy.
The permanent humanitarian program in 2024-25 will be 20,000, the same as in 2023-24. The onshore contribution to the permanent humanitarian program in 2023-24 is likely to have been between 2,000 and 3,000. This may be slightly higher in 2024-25 as asylum seeker numbers continue to be strong.
Overall, it is likely Treasury has underestimated the permanent visa contribution to net migration in 2024-25 by around 20,000 to 30,000 (ie a permanent visa contribution in 2024-25 of between 85,000 to 95,000 is a more likely outcome than 65,000).
NZ citizens
Treasury has forecast the NZ citizen contribution to net migration at 30,000 in 2023-24 and 20,000 in 2024-25 (this difference appears to have been affected by rounding to the nearest 5,000).
The number of NZ citizens in Australia increased in 2023-24 by around 20,000. However, this would have been net of a significant jump in NZ citizens who have been in Australia more than four years directly acquiring Australian citizenship. From 1 July 2023, NZ citizens who had been in Australia for four years or more could directly access Australian citizenship without first securing permanent residence.
This change has permanently increased the net flow of NZ citizens to Australia. According to Statistics NZ, in 2023-24 a record net 50,000 NZ citizens left NZ with the bulk of these moving to Australia. While NZ citizens acquiring Australian citizenship does not directly impact net migration, it is creating a pull factor that has increased the long-term contribution of NZ citizens to net migration.
If the Australian labour market remains relatively strong, large numbers of NZ citizens will again come to Australia in 2024-25. In just the first three months of 2024-25, the net movement (short and long-term) of NZ citizens to Australia has been positive 12,980.
It is likely Treasury has underestimated the net inflow of NZ citizens to Australia, possibly by around 5,000 to 10,000 in 2024-25 (ie NZ citizens may contribute 20,000 to 25,000 in 2024-25 if the Australian labour market remains relatively strong).
Australian citizens
Treasury has forecast that after a contribution of negative 35,000 in 2023-24, the Australian citizen contribution to net migration will gradually decline to an average of negative 15,000 per annum.
In 2013-14 and 2014-15, the net migration contribution of Australian citizens averaged negative 23,000. This was mainly due to a relatively weak labour market with unemployment rising to 6%. As the labour market strengthened, fewer Australian citizens departed and the contribution of Australian citizens to net migration went from negative 21,490 in 2015-16 to negative 11,760 in 2018-19.
During COVID, there was a major influx of Australian citizens. In 2019-20, the Australian citizen contribution to net migration was positive 38,100 and positive 18,100 in 2020-21 as Australian citizens sought the relative safety of Australia.
As things started to return to ‘normal’, the Australian citizen contribution to net migration in 2021-22 was negative 12,930 and negative 32,200 in 2022-23.
Treasury had forecast this increasingly negative trend to continue in 2023-24, perhaps associated with its forecast of a sharply weaker labour market. But that does not appear to have eventuated with the net movement (short-term and long-term) of Australian citizens in 2023-24 being positive 33,780.
That suggests that in 2023-24, it is likely the Australian citizen contribution to net migration was close to zero or a small negative rather than the Treasury forecast of negative 35,000.
In 2024-25, Treasury has forecast the Australian citizen contribution to net migration at negative 20,000. That is possible but would require a significant deterioration in the labour market. In the three months to September 2024-25, the net movement of Australian citizens has been positive 21,930 compared to positive 65,910 in the first three months of 2023-24.
Conclusion
There are three main uncertainties regarding net migration in 2024-25 compared to 2023-24:
- The extent to which the Education Minister will be successful in getting the Immigration Minister to loosen student visa policy in 2024-25 compared to the current situation and the situation that would have resulted if the revised evidence levels had been not been postponed. If student caps become the dominant driver of student visa policy, there is no chance of reducing the student contribution to net migration to the Treasury forecast of 130,000.
- The extent to which the Immigration Minister is successful in tightening immigration policy in other areas, including WHMs and PALM visas given the ongoing reports of worker exploitation in these areas.
- The relative state of the labour market. A significant weakening of the labour market would drive down net migration naturally.
Assuming little change to the labour market, the current policy settings are likely to result in net migration in 2024-25 of between 350,000 and 375,000. If the Education Minister is successful in further loosening student visa policy, the outcome may be higher still.
Over the last decade, perhaps unintentionally, governments have significantly increased the underlying level of net migration (in a relatively strong labour market) through a range of new visa initiatives. This fact does not appear to be reflected in the Labor Government’s long-term net migration forecast of 235,000 or the 160,000 announced by Peter Dutton. Neither have explained how these forecasts will be delivered in terms of the required policy changes.
On this front, a fascinating issue will be how the Coalition votes on the student capping legislation. While the case has clearly been made to the Senate that student caps are bad policy being implemented badly, the Coalition may still vote for the legislation on the misguided view that it will need these powers if it wants to get net migration down to its target of 160,000.
Whatever the vote on the legislation, Treasury will want to increase its net migration forecast for 2024-25 from the current 260,000 in the Mid-Year Economic and Fiscal Outlook to be published in December. It is unlikely the Treasurer would agree to an upwards revision to more than 295,000. But at some stage prior to the election, Treasury will need to publish its actual forecast for net migration in the Pre-Election Fiscal Outlook.
That will set the scene for an immigration-focused election with lots of finger-pointing and few policy solutions — just what Peter Dutton would want.
Dr Abul Rizvi is an Independent Australia columnist and a former Deputy Secretary of the Department of Immigration. You can follow Abul on Twitter @RizviAbul.
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