The recent announcement that the Federal Government will scrap the 457 working visa for temporary skilled migrants is more of an age-demography solution than a national jobs solution. The fundamentals are telling us that migrants will play a large role in growing our population over the next 50 years, as well as putting downward pressure on Australia’s dependency ratio.
Without migration, Australia’s population will decline. Within developed countries, the generally accepted fertility rate (births per female) to keep a population steady is 2.0. Latest estimates from the Australian Bureau of Statistics (ABS) in 2015 show that Australia’s fertility rate is currently at 1.8, suggesting if we have 0 net migration in the future, Australia’s population will complete a U-turn on its current growth rate of 1.8%.
ABS population projections clearly support this. Under the ABS’ medium growth rate assumption we will see 240,000 new overseas migrants each year in the next 20 years.
Younger migrants favoured
The reforms will not see a reduction in the approximate 240,000 migrants that enter Australia each year. But instead, it will see a leaning towards younger migrants who have greater longevity in the Australian labour force.
Migrants wishing to apply for a 457 visa will have to be below the age of 45 under the new guidelines, down from the previous age limit of 50. This preference for younger migrants was also echoed last year when the government sought to increase the working age for the working holiday visa to 35, up from 30.
What makes this all relevant is Australia’s dependency ratio, which specifies how much people in retirement (non-workers) and to some extent young children in education depend on Australians who are working. The dependency ratio tells us a lot about how our current working population can support our younger and older generations. In Australia, the ratio currently sits at 50%, but is expected to worsen to 65% over the next 50 years.
So what does this mean for super funds?
Overseas migrants represent the largest inflow of new potential superannuation members each year.
All Australian workers require a superannuation provider (although not all, such as the self-employed, are mandated to contribute to super). It’s fair to say that coming from another country, these younger overseas migrants may have lower general understanding of Australian superannuation, including the role of the super system in assisting to fund retirement, Superannuation Guarantee and Choice of Fund. . This represents a huge opportunity to effectively engage a new cohort of potential members and drive customer growth through awareness, education and engagement.
Ultimately, changes to visa eligibility will not reduce the number of migrants arriving in Australia. However, these changes clearly reflect an implied directive that newcomers need to be young and ready to work.