Per Capita GDP Nearly Unchanged Despite Migration Reduction — Australian Treasury Report

Per Capita Income Differences by Migration Levels

The Intergenerational Report released by Treasury on September 23 analyzed scenarios with annual net overseas migration figures of 185,000, 235,000 (baseline), and 285,000. In the low migration scenario, per capita GDP in 2066 would fall by $400 compared to the baseline. In the high migration scenario, despite an additional influx of approximately 2 million people over 40 years, GNI per capita would increase by only $100.

Liz Allen, senior lecturer in demography at Australian National University, explained that while individual shares remain nearly identical, the size of the overall pie differs. In the low migration scenario, the population would reach approximately 36 million, while in the high migration scenario it would reach approximately 42 million. National GDP growth rate would fall to 1.3% in the low migration scenario, lower than the baseline scenario's 1.6%.

Aging Population and Fiscal Burden

In the low migration scenario, national debt as a percentage of GDP would increase by 4.8%, and spending on aged care, the National Disability Insurance Scheme (NDIS), and healthcare would rise by 0.6%. The old-age dependency ratio (population aged 65 and over per 100 workers) is projected to rise from the current 27.4 to 40.2. In the low migration scenario, this ratio would increase to 43, but in the high migration scenario it would fall to 37.8.

Erin-Lea Brown of the Grattan Institute stated that increased migration mitigates the impacts of aging. Allen noted that if the government must do more with fewer resources due to a relatively shrinking working-age population, living standards could decline.

Productivity as a More Important Variable

The report analyzed that productivity changes have a far greater impact on national wealth. It assumed baseline productivity at 1.2% of GDP and modeled scenarios ranging from 0.8% to 1.6%. In the high productivity scenario, GNI per capita in 2066 would jump from $149,500 to $172,000, and national debt as a percentage of GDP would plummet from 27.4% to 2.4%.

Brown stated that labor productivity growth has driven per capita real GDP growth over the past 40 years. With population growth slowing and the gains from women's economic participation over the past 40 years plateauing, he emphasized that labor productivity must play an "even more important role" for future economic growth.

Government Position and Expert Recommendations

Treasurer Jim Chalmers defended the government's plan to reduce annual migration to 225,000 by 2028, stating on ABC's 7.30 program that migration is a "positive force for the economy and society." The opposition Coalition and One Nation party argue that migration should be reduced further.

Allen stated that with many countries including Australia recording fertility rates below the replacement level of 2.1, a review of the tax system is necessary. He suggested "taxing corporations, other entities, and Australia's non-renewable resources." Chalmers rejected both GST changes and inheritance tax introduction on September 23.

Source: SBS News