The Effects of Future Immigration Scenarios on GDP and GDP Per Capita in Australia

Peter McDonald, Australian National University
Jeromey Temple, Australian National University

With the Australian Productivity Commission, the authors have developed a demographic-economic model, MoDEM, that enables examination of the impact on future gross domestic product (GDP) and GDP per capita of changes in a population’s demography (fertility and migration), labour force characteristics (participation, hours of work) and productivity growth. This model has been successfully employed to examine the impact of changes in migration on GDP and GDP per capita in Australia and has been fed into the Australian policy-making process. For Australia, the model shows an inevitable fall in GDP per capita in the next decade as the baby boom generation leaves the labour force. However, this effect can be modified in the short term and reversed in the longer term through specific levels of international migration. The comparative advantage provided by immigration reduces in value as the level of migration increases and so an optimum level of migration can be determined.