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Increased international student intake would boost economy in COVID-19 aftermath

Increased international student intake to boost economy

Australia could be one million people short of pre-COVID-19 expectations by 2030, and this shortfall – particularly the loss of skilled working-age migrants – will reduce GDP by up to $117bn below its projected level, on an ongoing basis, analysis by KPMG published today shows.

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  • Australian population may be a million people short of projections by end of decade.
  • Loss of young, skilled migrants would damage economy – hit to GDP could reach $117bn pa by 2030. 
  • Accelerated program of overseas student intake proposed, augmented by permanent residency.

The report, Pathways to Recovery, shows that in the absence of a vaccine in the next two years, Australia’s population in 10 years’ time is projected to be 28 million rather than the 29 million the ABS predicted before the COVID-19 crisis. The $117bn loss of GDP equates to an $80bn drop in household disposable income – or $2,800 per person – which is a better measure of the living standards of Australians.

Dr Brendan Rynne, KPMG Chief Economist, said: “The annual loss of GDP and national income from reduced immigration is caused by two factors. The first is fewer working-age people supporting older Australians, as migrants are typically younger. The second is the loss in productivity, since the immigration program is deliberately tilted towards skilled migrants including university students and graduates.

“Our modelling found that even a modest 40,000 additional skilled working-age migrants would boost GDP by up to $4.7bn by the end of the decade. Overseas students, if given a clearer pathway to residency, would be a means to achieving that end. Extra incentives will be needed to make them choose Australia, as in the post-COVID-19 world competition for international students will be intense, so we propose an accelerated and targeted intake program.”

The report comments that if a vaccine is found within 12 months, the shortfall in previously forecast population would be around 420,000 by 2030. But if there is no vaccine for at least two years it would be one million people.

KPMG’s Global Lead for Education, Dr Stephen Parker AO, said that for the last decade immigration prospects for international students had been left unstated, and yet immigration is the single most important drawcard for a sector that is vital to Australia’s future.

“I think Australia should say openly that talented, working age people must become a higher proportion of our overall population because our natural birth rate is below replacement levels and we have a growing number of retirees. If international students make the sacrifices to come to study here, supporting our educational institutions and adding to our diversity, then we will look favourably upon them if they wish to stay,” Dr Parker said.

The KPMG paper argues that a powerful way to increase living standards is to increase the skilled migration intake by boosting international student numbers and providing a pathway for these students to settle in Australia, because:

  • they pay fees to Australian institutions and spend money in the economy while studying;
  • some stay on for a while through post-study work rights, continuing to spend and pay taxes; 
  • and most important, others stay on permanently, spending, reducing the age dependency ratio and strengthening the nation’s skills base.

The paper suggests that to attract these students in a highly competitive global marketplace, the Australian Government could:

  • make post-study work rights last longer; 
  • add further permanent residency points for those staying on to work; 
  • add even further permanent residency points where both the course and post-study work rights are in an area of skill shortage outlined in updated skills lists; and
  • introduce an accelerated pathway to residency program for students, especially those in regional locations, based on updated skills lists.

Using Australia’s international higher education system as a pathway to residency has the advantages of selecting younger, highly skilled migrants who have already had the experience of living in Australia during their studies.

For further information

Ian Welch
KPMG Communications
0400 818 891
iwelch@kpmg.com.au

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