Migration is once again a central issue in Australian politics, often blamed for housing shortages and overcrowded public transport. However, lost in the heated debate is the question of how we select migrants who will thrive in their new country. A better-designed points test could quietly transform Australia’s migration program, boost productivity, and raise tax revenue by billions of dollars annually. Recent budget announcements have moved in this direction.
Current System Flaws
The existing points test awards points for characteristics such as community language credentials, regional study, professional year programs, specialist qualifications, and studying at an Australian university. However, these criteria do not predict economic success. A more effective test would prioritize traits that actually drive economic outcomes: age, education in certain fields, English proficiency, and relevant work experience. Migrants selected on these factors are more likely to thrive and contribute to the services Australians rely on.
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, particularly international students. Meanwhile, the number of people on bridging and other temporary visas has exploded, creating a backlog that harms both migrants and the wider community struggling with housing, services, and infrastructure.
Research using tax records from 2010–11 to 2021–22, linked to Census and visa data going back to 1990, tracked how migrants fare in Australia. The findings reveal that five categories—community language credentials, regional study, professional year programs, specialist qualifications, and studying at an Australian university—do not predict better outcomes. Some are even associated with worse labor market results. International students, who make up a large share of points-tested migrants, typically earn less and are more likely to work below their qualification level.
Big Design Flaws
The points test has three core problems:
- Misaligned calibration: Factors that matter for earnings, like age and English skills, are underweighted, while factors with little or negative predictive value still count.
- One-size-fits-all approach: The same rules apply across all occupations, but while the test works well for health roles, it fails for business and engineering, where skills and networks matter more.
- Inconsistent assessment: The system evaluates migrants already working in Australia using the same criteria as offshore applicants, ignoring the wealth of information available about the former group.
Reform Options
Two reform options promise economic benefits and simpler administration. The second is more complex but offers greater potential gains.
Option 1: A Cleaner, Simpler Points Test
This option would tidy and re-weight the test by:
- Dropping all five categories that do not predict good outcomes.
- Increasing emphasis on age, education, English proficiency, and years of relevant Australian work experience.
These factors correlate with higher earnings and stronger fiscal contributions over a lifetime.
Option 2: Two Streams, One Goal
This bolder option splits applicants into two streams based on their current status in the Australian labor market:
- Skills-based stream: For people not yet working in Australia (including offshore migrants and recent international graduates). This stream uses a classic skilled migration model focused on age, education, and English, but restricted to occupations where past data shows migrants without Australian experience find skilled work—mostly medical and other regulated professions.
- Labor 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 hybrid stream combines employer-sponsored and independent skilled visas, rewarding youth and expected earnings while adding the discipline of demonstrated success.
How This Would Help Fix the System
A better points test would improve the mix of permanent migrants by shifting toward people more likely to work in skilled jobs and pay higher taxes. It would remove incentives for low-value “visa chasing” in the education system by cutting points for features that do not predict long-term outcomes. It would also clarify the rules: the best routes to permanent residency are either having qualifications in a highly regulated occupation or proving your worth in the Australian labor market.
Australia’s migration debate is often framed in terms of how much to cut and how fast. But there is another, smarter lever: improving who we choose and how we choose them. Effective immigration reform is a nation-building exercise that delivers enormous gains for migrants and even more for the communities they join.
