Immigration levels require skilful assessment when size really matters

CONTROVERSY has continued in the two years since the former prime minister Kevin Rudd declared himself a supporter of a "Big Australia". This contrasts with his successor, Julia Gillard, who strongly opposed the "big" notion on environment and sustainability grounds. The Department of Treasury's revision of the Intergenerational Report brought the issue into focus with one scenario suggesting that Australia may reach a population of about 35 million or 36 million by 2050. Is this realistic and is it sustainable?

The opposing arguments have been voiced by well-recognised commentators. Demographer Bernard Salt in his latest book The Big Tilt explores issues around the impact of baby boomers exiting the workforce and the need for them to be replaced. The opposing view is espoused by Dick Smith in his book Population Crisis, which argues strongly for a smaller Australia.

The truth is somewhere in the middle. There are 5.3 million baby boomers making up 24 per cent of the population with the oldest turning 65 this year. About 3.3 million remain in the workforce (about 36 per cent of the total labour market), and it is expected that only 16 per cent will still be working by 2020. The exit of baby boomers to retirement will lead to an unparalleled loss of skill and experience. However, it is worth noting that the effects of the Global Financial Crisis pushed the average retirement age of about 55 years to beyond 60 years by 2010. Recent research by the University of Tasmania indicates that many baby boomers are now considering a deferral of retirement until about 64 years of age.

Dick Smith points out that if this trend continues, and more baby boomers defer retirement, it will, in fact, allow skill needs to be met over the next decade. At the same time, he argues that the net overseas migration target should be about 70,000 and not the current level of about 180,000, which is down from a pre-GFC high of more than 300,000. Smith says population should be limited to about 26 million.

However, as Bernard Salt points out, the net overseas migration has to be about 180,000 just to offset the exit of baby boomers. His assessment of the impact on budget outlays is that about 80 per cent of baby boomers will be entitled to a full or part pension. The challenge, of course, is where the taxpayer base will come from to fund this growing cost, as well as meet increasing health and medical requirements. This is the nub of the debate around the need for a growing population. Some demographers will argue that even with the current population profile, we are on track to exceed a population of 30 million by 2050. So where does this leave us in terms of future workforce needs? The Intergenerational Report espoused the "3Ps" as the solution: increased population to offset the exit of baby boomers increased participation by disadvantaged and non-engaged groups to bolster the overall workforce and productivity improvements to boost workforce efficiency through the take-up of new technologies and new processes.

The issue of migration has become extremely sensitive. The federal government has radically recast the occupation list used for permanent migration and cut it from more than 400 to below 200. Some, however, would argue that this was more about unhooking the vocational education and training system and training providers from a permanent migration pathway for students. A sad footnote here is that a $17 billion industry, with 125,000 international students in Australia pre-GFC, has been decimated. The latest forecast by the Department of Immigration is for 15,000 international students in 2013/2014.

It also seems to make little sense to host international students and then take no advantage of their skills as future workers.

On the latest Skilled Occupation List (SOL) which came into effect from July 1 13 occupations were added and four removed. The SOL identifies specialised areas of high value and includes managerial, professional, associate-professional and trade occupations. The list has a particular emphasis on engineering, project management, medical and nursing specialisations, IT and telecommunications, and a range of building and mechanical trades. It is interesting that the recently added occupations include environmental health officers, occupational health and safety advisers, hospital and retail pharmacists, barristers and solicitors, and roles such as fitter and turner, welder, and metal machinist. One would think Australia should be able to meet these needs through better educational outcomes for young Australians.

While skill shortages seem confined to certain sectors at this point, there remains the potential for wages growth to take off as the economy picks up more broadly. Sectors such as building and construction have already experienced wage deals in excess of CPI which will put pressure on other sectors to catch up ahead of next year's Fair Work Australia wage review. This will add to business costs and further constrain confidence and recovery.

So what does business need to do? Employers should undertake detailed workforce development analyses to uncover looming skill gaps, analyse succession planning requirements, and ensure that learning and development strategies are in place. It would also be prudent to contain costs and identify strategies to ensure that the business remains competitive and sustainable in the decade ahead.

We will still need strong levels of migration to meet workforce needs and also demand a more responsive education and training system to ensure that existing workers and new entrants develop the skills they need to keep business viable and sustainable.

Mark Stone is chief executive of the Victorian Employers' Chamber of Commerce and Industry and Andrew Rimington is its senior manager of employment, education and training.