Productivity Commission’s Sweeping Migration Reform Recommendations | Occupation Lists Scrapped for Both Subclass 189 and Employer Sponsorship, Salary Levels “Reign Supreme”! All Investor-Migration Programs Abolished.

The Australian Productivity Commission has released its five-yearly report.As the name suggests, the report it releases every five years sets out reform recommendations aimed at lifting Australia’s productivity across the board. Migration has always been an important part of it.

In September 2016,the Commission also released a report dedicated specifically to migration reform

Its key reform recommendations included:
1. Abolishing the Significant Investor program (still under active debate; the Labor government is giving it serious consideration)
2. Reforming the occupation lists by merging the then CSOL and SOL lists(a major overhaul of the occupation lists was carried out in 2018)
3. Adding points for single applicants under the skilled migration points test(this reform was made in 2019; single applicants can now claim 10 points)
4. Doubling the price of the paid parent visa (no news as yet)
5. Introducing a more flexible medium-to-long-term temporary visa within the parent visa category(already launched — the current Subclass 870 visa)

So the Productivity Commission’s recommendations carry considerable weight in government reform. While they won’t take effect immediately,they serve as a bellwether for the reforms that follow,including some recommendations that seemed quite fanciful at first. So let’s take a look at the 2023 report and see what surprises it holds.

The key issues today
From the perspective of lifting Australia’s productivity, the design of the Australian visa system has the following problems:
1. Over the past decade, Australia’s migration intake has shifted towards visas that contribute relatively poorly. Given the importance of labour-market matching, policy should place greater emphasis onthe quality of migrants

2、the skilled occupation list is difficult to compile and update accurately, so its value as the criterion for defining permanent residency is questionable.

3. Employer sponsorship can provide certainty of employment outcomes,so a high salary threshold (and, for permanent migration, age) should be used as the key eligibility criterion,rather than whether a skills shortage exists.

4、Points-tested permanent migrationcan attract migrants with particular skills and attributes,but it also needs to better meet employers’ needs

5、All investor visas should be abolished,because they ultimately impose anet cost(net cost)

6. To address the current poor skills matching, broaden the default recognition of certain overseas licences and align skilled-migration requirements with domestic occupational-licensing recognition, so that migrants who have undertaken high-level skills training can also find suitable work in Australia.

7. The most significant fiscal risk from migration comes from permanent visas rather than temporary ones.Therefore, temporary migration visas with longer and more clearly defined durations would help employers meet their needs,without necessarily involving permanent migration. We should expectinternational students to be able to test their skills in the Australian labour market after graduating, but this need not necessarily involve permanent migration.

8. Establish a safety valve for the shortages emerging in government-funded care services. Fiscal pressures on government limit its ability to raise wages, making shortages in care occupations hard to resolve — particularly the increasingly severe shortage in aged care. To address these shortages, a permanent migration scheme constrained by a binding salary threshold should be trialled, but the scheme would be wound back if an alternative model that can sustainably support higher wages is implemented.

Reform recommendations!

Recommendation 1: Abolish all investor-migration programs
Previously it was the Significant Investor program; this time the Productivity Commission recommends abolishing the entire investor-migration program outright. The reason is simple and direct:as the chart below shows, the long-term fiscal impact of investor migration on Australia is negative, and within the skilled category investor migration is the only one that is negative

Australia should instead providebetter support to temporary visa holders who genuinely plan to build a real business in Australia, including the ability totransition to permanent residency througha reformed Subclass 189 Skilled Independent visa

The reformed Subclass 189 should give better weight to the applicant’s age and income.


Recommendation 2: Shift employer sponsorship from an occupation-list basis to a salary-threshold basis



= The government should consider no longer using occupation lists for employer sponsorship (whether temporary or permanent), and instead using a salary threshold
= The income threshold for employer sponsorship should be set well above the overall level for temporary skilled migration
= Within the employer-sponsored category, the income threshold for temporary subclasses (such as 494/482) should be lower than for permanent subclasses (such as 186)
= For employer sponsorship,the income threshold for permanent subclasses should rise with the applicant’s age and an age cap should apply.The Productivity Commission considers thatthe threshold for permanent subclasses should be $85,000 or above

= In addition, theydo not believethat different regional areas should have different thresholds.


Recommendation 3: Refine the independent skilled migration visas

= The Subclass 189 points test should also consider no longer being restricted by the occupation lists
= But the points settings need to be designed in every respect to award points to applicants who can deliver better fiscal and employment benefits
Taking into accountincome level, age group and income benchmark level, applicants who have worked long-term in Australia would be able to earn additional points
= The EOI points test needs to be updated regularly based on empirical research

= So the Productivity Commission’s specific recommendations on the points items are shown in the chart below:

Recommendation 4: Improve the temporary visa system and its pathways to permanent residency


= The duration of temporary skilled migration visasshould be extended to 6 years, but the holder must continue to work for their sponsoring employers (for a certain proportion of working time)(employers can be changed under the same visa)
= Temporary skilled migration visas should be able to lead to permanent residency through reformed employer-sponsored and independent skilled migration visas
= International graduates who have completed a bachelor’s degree or above in Australia could havea Subclass 485 visa of at least 5 years,but would need to demonstrate continuous employment with a salary above the set salary level



Recommendation 5: Improve job mobility for employer-sponsored visa holders

– Design the visa to allow employees to move to more competitive employers, and to allow a period of temporary unemployment while looking for a new employer


Recommendation 6: Establish a pilot permanent visa for specific industry sectors
Provide a pilot permanent visa for occupations with persistent shortages and slow wage growth (such as aged care and disability care). However, this visa should also be subject to the current salary income threshold and require 4 years of work in the relevant industry.

A quick recap


In the report, every recommendation and issue is backed by very detailed analysis and data. From a productivity standpoint, however much the reform recommendations vary, they all come back to the same core idea:
Skills/qualifications must connect to a job
The job must connect to salary and age

Age is considered because it bears on how long a person can keep contributing


This is because, for many years, one of the most fundamental problems of Australia’s skilled migration systemhas been that employers cannot make good use of skilled migrants’ skills —or, looked at the other way,that skilled migrants cannot find work that matches their skills and expertise.In practice, a mismatch that goes unused is good for neither Australia nor the applicant.


The Productivity Commission therefore recommends a change of approach in policy —shifting from broad target-driven policy to narrower, results-driven policy.


At present, for example, suitable applicants are sought on the basis of wanting tofill labour-market shortages (the occupation lists); and points are awarded for past work experience in order topredict and assess whether applicantshave better skills and are more likely to find job opportunities in Australia.


The Productivity Commission recommendsplacing greater emphasis, going forward,onthe results that can be seen right now —for instance, whether an employer-sponsored applicant can right nowfind an employer willing to offer them a high salary and a long-term position;if they can, then there is demand and there is capability — so why should it still be constrained by the situation of an entire industry or field? Or, for instance, whether a Subclass 189 applicantcan, while still relatively young, hold a job with good pay that matches their skills — does it really matter so much if they don’t have that many years of relevant work experience?


We believe this report will give the federal government a great deal of directional inspiration for reform. Not every recommendation will immediately produce an identical outcome, but many of the reforms to come should bear the imprint of these recommendations, or be built upon them.


So for future migrants and international graduates, finding relevant work that matches your field of study and skills should matter more than ever.

Previous articles


A rundown of the [genuinely] good opportunities to apply for Australian skilled migration from overseas!

Can the points go any lower? Accounting/IT/Engineering invited at 65 points for Subclass 190!

NSW/VIC/TAS — state nominations rolling in across multiple states! Subclass 491 grants keep coming!



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