Points-tested visas, which allocate points to potential migrants depending on their age, proficiency in English, education, and work experience, account for almost two-thirds of all permanent skilled visas issued by Australia over the past decade. On current trends, Australia will offer around 800,000 points-tested visas over the next decade. Australia should prioritise migrants for points-tested visas based on their long-term potential, estimated using their likely earnings.

Migrants contribute greatly to Australia’s prosperity. Migration has shaped Australia’s diverse, highly-educated and cohesive society. Skilled migrants in particular lift the productivity of local workers, raising Australians’ incomes. Each permanent skilled visa-holder boosts Australian government budgets by $250,000 over their lifetimes, or about $34 billion for each annual intake, as they pay more in taxes than they receive in public services and benefits over their lifetimes.

But points-tested visas are not working as well as they should. The points test does not sufficiently reward the most-skilled applicants. Points-tested visas are offered to a subset of skilled occupations where workers are deemed to be ‘in shortage’. This shuts Australia off from many talented migrants, and distorts the study and career choices of many temporary visa-holders already here, leaving many in visa limbo.

The authors of this report argue that two simple changes are needed:

1. The points test should be reformed to better reward the most skilled applicants. More points should be offered to highly-educated applicants and those with strong English language skills. Migrants trained in any high-skilled occupation should be eligible to apply, and points should be offered for any skilled employment experience and particularly for high-paying Australian work experience.
2. State and regional points-tested visa programs should be abolished, and more skilled independent visas offered in their stead. Abolishing these visas would help Australia select more highly-skilled migrants, and give those migrants the best chance to thrive in Australia.