Migration and Australia’s post-COVID-19 economic crunch

Like most developed economies, Australia entered the coronavirus crisis in an economically weakened state.

Police officers patrol near the Sydney Opera House following the implementation of stricter social-distancing and self-isolation rules to limit the spread of the coronavirus disease (COVID-19) in Sydney, Australia, 6 April 2020 (Photo: Reuters/Loren Elliott).

Prior to the crisis, Australia’s stock market was roaring and corporate profits as a portion of GDP were strong. But economic and productivity growth were anaemic, real wages and labour utilisation were flat, and private consumption and business investment were weak. That’s an ideal combination for driving up wealth and income inequality.

Slow economic growth has been a feature of developed economies for the past decade. This coincided with the first decade in which almost every developed nation, plus China, simultaneously experienced a demographic burden phase with their working age to population ratios in decline Some nations, such as Japan, started ageing decades earlier.


The developed world’s second decade of demographic burden — the 2020s — has kicked off with a substantial recession if not a depression. Until there is a vaccine for COVID-19, economic activity will remain heavily subdued, even as some restrictions begin to ease.

But once we do have a vaccine, will we see an economic ‘snapback’ as predicted by Australia’s Prime Minister Scott Morrison? Or will it be more like a dead cat bounce, with economic growth remaining sluggish as it did for years after the Great Depression?

Net migration to Australia in 2020 and 2021 is likely to be substantially negative. Most of the over one million temporary entrants in Australia, not including New Zealand citizens, have been told to go home. Those who cannot afford to get home and cannot keep their job will flood Australia’s charities, eventually forcing the government to either help them leave or help them survive.

Australia has not experienced successive years of negative net migration since the early 1930s. Negative net migration of over 150,000 per annum would result in overall population decline — something Australia has not experienced since 1916 when troops were sent to Europe.

Recessions in Europe and North America will also reduce net migration to those continents —especially with the rise of far-right, anti-immigration parties urging their governments to adopt Australian-style border protection measures.

ABF media

Austere economic times tend to accelerate a decline in fertility rates. That was the case after the Great Depression and the recession of the early 1990s.

The combination of very low net migration and declining fertility will accelerate population ageing in the 2020s, with severe consequences for economic growth and government budgets. Government balance sheets will already be severely impaired by the coronavirus recession, with very little revenue coming in and massive stimulus and support expenditure. If a vaccine is not available until well into 2021, further social, employment and business support, health, aged and childcare expenditures will also be required.

While much needed, governments may not be enthusiastic about further stimulus measures to kick-start their economies once a vaccine is available.  Indeed, they will be eager to wind back many of the support measures put in place for the crisis. They will be highly conscious of the additional pressure on government budgets from populations that will be ageing more rapidly than projected by the United Nations in its 2019 revision.

So what should Australia do?

In the very short-term, the Australian government needs a more nuanced approach to temporary entrants than its ‘go home’ message. That rhetoric trashes Australia’s reputation for the future, deepens the recession and makes recovery more difficult. Helping temporary entrants abide by self-isolation requirements, attend the doctor as needed, avoid destitution and contribute services to Australia’s health and aged care needs should  be a short-term priority.


Once a vaccine is found, the key challenge will be to get the maximum number of people back to work as quickly as possible. In the current low interest rate environment, the best way to do this would be by dealing with Australia’s infrastructure backlog — both large projects as well as smaller, local-level investments that would benefit small businesses. That would give the economy the boost it will need as well as develop a capital base to improve longer-term productivity.

The coronavirus crisis has also raised questions of the relative role of the private and public sectors in the delivery of essential services — such as health, aged care and key utilities — as well as the maintenance of a minimum manufacturing capability and the safeguarding of government stockpiles of key supplies. How these industries and arrangements are shaped in future will be a major challenge.

Despite the costs, maintaining the current crisis policy of free childcare and public investment in early childhood education may be the best way to slow a decline in the fertility rate and improve long-term educational performance. With a constantly ageing population though, the challenges of weak aggregate demand, sluggish household consumption expenditure and very cautious business investment will remain.

Slowing the rate of population ageing through targeted immigration, as it has done since the early 2000s, can help Australia better manage the transition to a more aged society. That will require a re-think of current immigration policy settings to assist with recovery, including the recovery of Australia’s international education and international tourism industries.

But that will not be enough.

As John Maynard Keynes said some seven years after the Great Depression, with an ageing and declining population we shall ‘be absolutely dependent for the maintenance of prosperity and civil peace on policies of increasing consumption by a more equal distribution of incomes’.

Will governments around the world be up for such a challenge, having seen the critical role that essential service but poorly-paid workers play during a crisis?


Abul Rizvi is a PhD candidate on Immigration Policy at the University of Melbourne. He was a senior official in the Department of Immigration from the early 1990s to 2007 when he left as deputy secretary. He was awarded the Public Service Medal and the Centenary Medal for services to development and implementation of immigration policy, including in particular the reshaping of Australia’s intake to focus on skilled migration.   

This article was originally published by eastasiaforum.org.
Written by: Abul Rizvi


Join Australia-Asia Forum
receive newsletter & our event promotion

"*" indicates required fields

This field is for validation purposes and should be left unchanged.