Migration, international students will not fully recover until 2025

Victoria is expecting overseas migration to return to pre-pandemic levels by the middle of 2025 and has warned that any further delay would harm forecast growth of the state’s economy.

Thursday’s state budget anticipates overseas students will be among those arriving from the start of 2022 and with numbers “approaching pre-coronavirus levels” towards July 2025.

Victorians are also forecast to flock overseas once international borders re-open. The government is expects outbound tourism to outweigh inbound tourism once border restrictions ease, as international education and tourism remain the two sectors most affected by closed borders.

The return of international students will be crucial to the state’s economic recovery.Credit:Wayne Taylor

If the international recovery from the pandemic is slower than the current trajectory suggests, Victoria’s total service exports will drop 13 per cent on budgeted forecasts for 2022 due to the lack of students and tourists – illustrating their importance to Victoria’s economy.

The state hopes the federal government will agree to pay for its proposed village-style quarantine accommodation in Melbourne’s north, with no money set aside beyond the $15 million already spent on planning.

Treasurer Tim Pallas said conversations had been “incredibly positive” with the Morrison government so far.

Thursday’s budget also did not disclose how much Victoria would spend on hotel quarantine in the coming months. To the end of March 31, the program had cost $442 million since last July.

Despite hotel quarantine remaining in place until at least the end of 2021, when the alternative quarantine site would be built, there was no accounting for how much the government would spend on hotels until then.

The budget identifies delays in the global rollout of the coronavirus vaccine, and in turn the sustained closure of Australia’s borders, as a “key downside risk” to the path back to surplus.

Net overseas migration was the largest driver of Victoria’s population growth for more than a decade until last year when the block on incoming migrants was compounded by foreigners and international students returning home.

The budget expects Victoria’s population will grow by 0.3 per cent in 2021-22, 1.2 per cent in 2022-23 and 1.7 per cent in each of the two years after that.

Mr Pallas said that while the forecasts on migration and students were dependent on many variables, he had a “high degree of confidence in our capacity to project where we’re likely to be”.

“These numbers are, for example, much more conservative in terms of the numbers that the federal government have put in place,” the Treasurer said on Thursday.

“And I think they therefore put us in the solid position to have a lot more confidence about the projections that we’ve plotted and the way out of the economic event that has affected this state.”

Equity Economics lead economist Angela Jackson said governments faced a difficult task forecasting population growth during the pandemic but Victoria had made a “strong assumption” on migration bouncing back.

“The question is how realistic can it be? Are people going to be willing or able to move at the same levels as before?” Dr Jackson said.

“In Victoria particularly, economic growth is more linked to people than states with iron ore supplies. So migration and international education are critical, presenting an even more significant risk compared to the rest of the country if the state’s assumptions turn out to be overly ambitious.”

If the vaccine rollout and economic recovery is slower than expected overseas, the state government expects domestic business confidence will also suffer as Victorian companies put off investment decisions.

“The shocks to trade, overseas migration and business confidence [would] reduce Victoria’s gross state product by a peak of about 1 per cent in 2022-23 and by 0.9 per cent in 2024-25,” the government stated in its budget papers.

International education made $13.7 billion in revenue for the Victorian economy in 2019, the state’s largest export. Since that year, international higher education enrolments have plummeted 41 per cent.

The federal government has invited states and territories to come up with bespoke proposals to quarantine international students this year, which universities in particular have been angling for in the hope of bringing some students back before 2022.

Mr Pallas said on Thursday that Victoria’s plan to fly in 120 migrant workers and students per week was awaiting approval from the Morrison government and “we are largely at the control and behest of the Commonwealth on this”.

“We’ve put a proposal to the Commonwealth … so we can give a demonstration to our university sector that we are coming up with solutions to assist them in what has been a desperately difficult time for them,” Mr Palls said.

Dr Jackson said there was little in the Victorian or federal budgets to attract international students back to the country amid fears Australia is losing its market share to Canada and the United Kingdom.

“International education is highly competitive. Will we have the same market share as before the pandemic? Probably not, especially when there doesn’t appear to be a strategy to get there,” she said.

Earlier this week Deakin University vice-chancellor Iain Martin said he expected international enrolments would “bottom out” in 2022-23 before recovering to pre-pandemic levels in 2028.

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