We believe Australians have been lied to about skilled migration. And analysis of official data only exposes the tip of the iceberg. The entire system needs to be overturned.

Earlier this year, Home Affairs Minister Tony Burke appeared on Indian Link’s Pawan Luthra Podcast, claiming: ‘Economically, we need immigration. We need the skills; we need the people.’ Several weeks later, in an address to business leaders, Assistant Minister for Immigration Matt Thistlethwaite claimed: ‘Australia’s permanent migration program is heavily focused on skilled migration.’

In essence, the government’s position is that Australia is at the mercy of migrants to provide the skills that we need as a country and the so-called Migration Program is delivering for Australians.

This is false.

Institute of Public Affairs analysis of Home Affairs data shows that only a third of permanent visa approvals go to migrants who have satisfied Home Affairs’ skills requirements.

This is a part of the reason for why, despite having let in roughly 1.6 million net overseas migrants since 2022, about a third of businesses is estimated to still be experiencing a skills shortage.

But it gets worse.

Permanent visa approvals (misleadingly named the ‘Migration Program’) are not the same as overseas migration. Most permanent visas are granted to foreigners who are already in Australia.

If we look at net migrant arrivals, skilled visa holders only make up 23 per cent of Australia’s new migrants. If more than half of those so-called ‘skilled’ visa holders are, in fact, just dependants of people with skills – as is the case with the permanent skilled visa holders – then genuinely skilled migrants are actually only about 11 per cent of our annual net intake.

Of that already small cohort, many are: retail managers, graphic designers, and beauticians. All are considered ‘skilled’ by the federal government’s official list. The list of skilled workers even includes salesmen and call centre managers.

Only a very small number of that already small percentage of new migrants are mining engineers, physicians, mathematicians, architects, and educators – people with the most commercially valuable skills needed in Australia’s most critical sectors.

This is not to say that retail workers and call centre operators do not have important jobs; they absolutely do. But competency in their roles do not require years of structured study and the most rigorous training.

Rather than looking overseas to import these skills, the federal government can simply remove the financial disincentives that punish pensioners, students, and veterans for contributing more of their time and valuable skills to the labour market.

IPA Research Fellow Saxon Davidson noted:

‘Australian pensioners and veterans still face an effective marginal tax rate of 66 per cent should they earn over $226 per week. This occurs as a 50 per cent claw back is applied to their pension for every dollar earnt over $226, with normal tax rates on top. Similarly, students face an effective marginal tax rate of 76 per cent should they earn over $288 a week.’

Moreover, troublesome reporting requirements present an additional barrier to labour market participation for benefit recipients.

So, while hundreds of thousands of Australians are effectively being locked out of paid employment, the federal government is looking overseas to fill Australia’s skill shortages.

But it gets even worse.

Many of the engineers, physicians, and educators that are granted skilled permanent visas did not come to Australia carrying those skills with them.

They came to Australia unskilled – as international students, used Australia’s domestic resources to develop their skills (at Australian universities), and then applied to become skilled permanent residents.

The number of genuinely skilled migrants, who come to Australia carrying their skills with them, in critical areas of the Australian economy, is likely to be minuscule. And the impact is reflected in our economic data.

When Australia closed its borders during the pandemic, labour productivity skyrocketed, rising 4.2 per cent between the March quarters of 2020 and 2022. Over the course of this period, not only was net migration effectively zero, highly productive Australian expats returned home with their skills and contributed to Australia’s productivity boom.

When borders reopened, productivity swiftly collapsed. Between the March quarter of 2022 and the end of the 2023 financial year, labour productivity fell by more than 5.0 per cent. Since then, productivity has stagnated.

The largest contributor to this unprecedented productivity collapse has been the massive influx of unskilled and low-skilled migrants, who are the foundation of Australia’s migration programme. A skills-focused migration system would not have produced such perverse economic outcome.

Migrants, of course, should not be blamed for what has been happening. The federal government bears full responsibility for our current economic malaise and broken migration system.

Australians should not be gaslit by the political Establishment into questioning their lived experience and misled into thinking that mass migration is necessary to address Australia’s skill shortages.

Dr Kevin You is a Senior Fellow at the Institute of Public Affairs