Chart of the Month - July 2026

High levels of foreign migration have become contentious throughout the developed world. A 2023 Dutch study even sought to calculate the net-fiscal benefit of migrants by origin. So while reading Australia’s 2026-27 Medium-term Budget Outlook, a sentence caught by eye:

“On average, migrants [to Australia] typically have a more positive fiscal impact than members of the total population.”

The report even showed the impact of different net migration scenarios on Australia’s future fiscal balance (see chart below). The more migrants, the better.

Australia’s superannuation retirement scheme already puts Australia in an enviable fiscal position over the medium and long term. It turns out that positive net-migration also strengthens Australia’s fiscal position.

However, this net fiscal benefit from migration is not a given and reflects some unique characteristics of migration to Australia.

Most migrants are of working age

The reason ‌net foreign migration provides a fiscal boost to Australia is that most migrants are of working age (see the chart below). They pay taxes and aren’t big users of the health and education systems. In contrast, Australia’s native-born population is aging.

Source: Parliamentary Budget Office

The high number of migrants of working age has been a deliberate policy choice. Starting with the Howard government in 1996, Australia began to focus on skilled migrants over family reunification (see chart below).

Source: Home Affairs

Like Canada, Australia uses a points system to prioritize migrants of working age who have needed skills, recognised qualifications, work experience, and English language proficiency.

Over time, the selection criteria have grown. Further, permanent work-entry visas are now allocated using a ranking of potential migrants.

This narrowing of requirements has led to growth in employer-sponsored immigration. 

Australia has moved from a policy of “populate or perish” and “10 pound poms” to skilled matching and competition for the globe’s best workers.

A country of migrants

Among the OECD, Australia has the second-highest percentage of foreign-born people, and more than twice the rate of the US (see chart below).

The percentage of foreign-born has continued to grow post the Second World War (see chart below).

The COVID-19 pandemic interrupted net-migration, and the rate of migration has not yet recovered to its previous levels, but remains net positive.

Net migration has been and continues to be critical to Australia’s economic growth.

Source: ABS

New permanent migrants have come to work

However, unlike third-placed Switzerland and some other OECD members with large net-migration, e.g. Germany and Sweden, Australia has a much higher percentage of permanent migrants entering with a work visa (see chart below). This follows from Australia’s focus on skilled migration since the mid-1990s. And while Australia has experienced waves of refugees over its history, it has not experienced the level of refugees experienced by Europe over the last decade.

Migrants to Australia also have a higher rate of employment than the OECD average (see chart below). Their employment rate is also equal to the native born population.

A larger percentage of temporary migrants

Australia also has a higher share of temporary migrants compared to overall migrants (67%) than ‌Canada (47%), Switzerland (7%), the UK (53%), and the US (46%). 

This emphasis on temporary migration has developed as permanent migration became more focused on limited numbers of skilled migrants. Temporary migrants provide flexibility in the labour market and are critical for lower-skilled jobs. 

42% of temporary migrants are on a working holiday, with another 20% on temporary or seasonal work visas (see chart below). These temporary workers often work in roles shunned by locals, such as fruit picking and hospitality.

Final thoughts

Over decades, migrants have boosted Australia’s labour-force, economy, and fiscal position. This has been facilitated by the emphasis on skilled migration since the mid-1990s. While migration to some countries is losing its lustre, Australia remains focused on recruiting from the world’s best to meet its current and future needs.