Migration is back at the centre of Australian politics, blamed for everything from housing pressures to crowded trains. Lost in the heated debate is how we select those who will thrive in their new country. We need a process to select the most productive migrants to fill the permanent spots each year.
A better designed points test could quietly transform Australia’s migration program, increase productivity levels and raise tax revenue by billions of dollars a year. Recently announced changes in the budget move in this direction.
Currently, the points test allocates points to potential migrants for characteristics such as
community language credentials, regional study, “professional year” programs, specialist qualifications and studying at an Australian university. These criteria do not predict economic success.
A more effective skilled migration points test would select permanent migrants for the traits that actually predict economic success: age, education in certain fields, proficiency in English, and relevant work experience.
These migrants will thrive and effectively contribute to funding the services Australians rely on, contributing billions to our economy every year.
We offer a couple of alternatives, which could access potentially massive benefits for Australia.
What the evidence shows
When the points test was introduced, most applicants were offshore. Today, most points-tested visas go to people already in Australia, in particular international students.
At the same time, the number of people on bridging and other temporary visas has exploded. This backlog is bad, both for migrants living in limbo, and a wider community struggling with housing, services and infrastructure.
Our research uses tax records from 2010–11 to 2021–22, linked to Census and visa data going back to 1990, to track how migrants fare in Australia – their earnings, employment, and lifetime fiscal contribution.
We then ask: which traits in the current points test predict good outcomes, and which do not?
Five categories that attract points – community language credentials, regional study, “professional year” programs, specialist qualifications and studying at an Australian university – do not predict better outcomes. Some actually correlate with significantly worse labour market results.
The outcomes of international students are particularly concerning. Migrants who first arrived in Australia on a student visa make up a large share of the points tested program. These migrants typically earn less and are more likely to work in jobs below their qualification level than migrants on other pathways.
Big design flaws
The points test has three core problems.
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The points calibration is misaligned with real world outcomes. Things that matter a lot for earnings are underweighted, while factors with little or even negative predictive value still count.
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The test applies the same rules across all labour market situations. But while points-tested visas work well for some occupations, particularly in health, they’re bad for others such as business and engineering roles, where skills and networks matter more.
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Third, the system currently assesses migrants already working in Australia on the same criteria as applicants who have never held a job here. Yet we know far more about the suitability of individuals in the first group.
How to reform the system
In response, we offer two options. Both promise economic benefits and simplify administration. The second is more complex, but with potential to generate significantly better outcomes.
Option 1: a cleaner, simpler points test
Tidy and re-weight the test to:
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drop all five categories that do not predict good outcomes
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increase emphasis on age, education, English and years of relevant Australian work experience. These factors correlate with higher earnings and stronger fiscal contributions over the life course.
Option 2: two streams, one goal
This option is bolder and offers a far larger economic payoff. It splits applicants into two streams, based on whether they are currently working in the Australian labour market:
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The skills-based stream: For people not yet working in Australia (including offshore migrants and recently graduated international students), a classic skilled migration model, focused on age, education and English, but restricted to occupations where past data suggests migrants without Australian experience find skilled work. (Mostly medical and other clearly regulated professions.)
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The labour market experience stream: for temporary visa holders already working in their nominated occupation, selection is based on age and actual Australian earnings over the previous two years, with higher points for higher incomes.
This second stream is a hybrid of employer-sponsored and independent skilled visas. It keeps the flexibility of a points test to reward both youth and expected earnings, but adds the discipline of real, demonstrated success in Australia.
How this would help fix the system
A better points test would improve the mix of permanent migrants, by shifting the balance towards people more likely to work in skilled jobs and pay higher taxes.
It would remove incentives for low value “visa chasing” behaviour in the education system by cutting points for features that do not predict long-term outcomes.
And it would clarify the rules. The best routes to permanent residency are either having qualifications and experience in a highly regulated occupation, or proving your worth in the Australian labour market.
Australia’s migration debate is typically framed in terms of how much to cut, how fast.
There’s another, smarter lever: improving who we choose and how we choose them. Effective immigration reform is a nation building exercise delivering enormous gains, for migrants and even more so for the communities they join.
