The Migration Council of Australia cautioned that the program to send migrants to the regions might be undersubscribed because skilled workers might instead seek temporary visas to stay in the cities where they might have greater job prospects and higher salaries.
«Cutting the program by 30,000 will not have a significant impact on congestion as the numbers are averaged out nationally, but the cut will have an effect on the economy and on the long-term growth outlook,” said Migration Council chief Carla Wilshire.
«If you reduce the number of permanent migration places, you risk increasing the number of people in Australia on temporary visas, creating a class of permanently temporary residents.»
Abul Rizvi, a former deputy secretary of the immigration department and a recipient of the Public Service Medal for his work on Australia’s migration program, said it would be difficult to enforce a system that requires migrants to stay in a regional area for several years.
Mr Rizvi said there had been a steady rise in the number of visitors to Australia who apply for bridging visas once here, such as those seeking asylum, and that this group of «temporary» visitors could grow in response to the smaller permanent intake.
«If those numbers exceed the cut to the programs, you’ve blown your whole strategy,» Mr Rizvi said.
The fall in the permanent intake has coincided with a big increase in waiting times for visas, causing frustration for Australians with spouses born overseas.
Mr Rizvi said there was now a backlog of 80,000 applications for spouse visas.
Mr Morrison said if the government had reduced the cap below 160,000 a year then it would have hurt the budget.
He suggested that any costs from reducing the migrant intake would be offset by the benefits flowing from less congestion in the nation’s major cities.
«The whole point is, yes, to pause the overall intake but also to address the impacts of the economy on congestion,» he said.
«We can move to this level without impacting on the budget and I think without impacting on growth and continuing to maintain the momentum growth.»
Treasury documents obtained by The Sydney Morning Herald and The Age last year showed a 30,000 cut in migration numbers to 160,000 would cost the budget $500 million a year in foregone revenue. Much of that was from reduced income tax collections from working migrants.
Shadow treasurer Chris Bowen said Mr Morrison’s claim there was no cost to the budget was at odds with his claims made last year that the economy and budget would take a $4-$5 billion hit by an 80,000 reduction in permanent migration.
«When Scott Morrison was treasurer he opposed a cut in the migration program because of the cost to the budget — now apparently there is no cost,» he said.
«The Treasurer needs to explain how cutting the migration program comes at no cost to the budget — and whether or not Treasury is factoring in changes to congestion resulting from lower migration program numbers into the costing.»
Deloitte Access Economics director Chris Richardson said the coming budget may not be affected as the reduction in permanent migration numbers had been «informally» accounted for in the 2018-19 budget.
This meant the government could get around having to outline a direct hit to the budget bottom line in Josh Frydenberg’s first budget when it is announced on April 2.
Mr Richardson said even if a slowdown in population growth eased congestion pressures in some of the nation’s larger cities, there would be an economic price to pay.
«It has an impact on the economy, it has an impact on the budget,» he said.
Australian Industry Group chief executive Innes Willox said permanent migration should have stayed at 190,000, arguing strong population growth had contributed to the nation’s uninterrupted period of economic growth since the 1990-91 recession.
«The government’s plan to formalise a drop in the permanent migration program means that we will potentially miss out on a share of the future economic gains the program would deliver for Australia,» he said.
David Crowe is Chief Political Correspondent of the Sydney Morning Herald and The Age.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.