The working holiday maker program is a crucial part of Australia’s tourism industry. They not only spend significantly as tourists, they also provide the labour that enables many tourism operators to remain in business. Many go onto become permanent residents as part of the skill stream of the migration program.
During the pandemic when international borders were closed there was a sharp fall in working holiday maker arrivals while departures increased. This was part of a direction from former Prime Minister Scott Morrison for them to ‘go home’. As a result, the number of working holiday makers in Australia fell sharply. It had already been in decline since it peaked in 2013 when the labour market was stronger (see Chart 1).
In the last six months, the Government has sought to drive up the working holiday maker program through a range of measures including:
- providing for a third working holiday maker visa;
- encouraging working holiday maker applications on a fee free basis;
- negotiation of agreements with additional countries and expansion of caps on existing agreements.
This has resulted in the number of working holiday makers in Australia rising from a low of 19,324 in December 2021 to 40,912 in June 2022. But that is still well below the pre-pandemic level and is a reason behind current labour shortages in tourism and hospitality.
Australia’s working holiday program consists of two types of visas:
- Working Holiday Maker (WHM) Sub-class 417 is based on mainly longstanding reciprocal agreements with a range of developed nations including the UK, Ireland, France, Japan, Canada, Germany, South Korea, Taiwan and others. This visa is uncapped;
- Work and Holiday (W&H) Sub-class 462 is for a range of more recent agreements including with the US (which is uncapped) and capped agreements with other countries such as China, Argentina, Chile, Indonesia. Other than for the US, this visa requires applicants to have functional English and to have completed at least two years of undergraduate studies. Negotiations are proceeding for agreements with a range of other countries including India. These requirements are designed to reduce the risk of exploitation and abuse.
With international borders re-opening and various measures to encourage more applications, WHM visa grants increased strongly in 2021-22 but were still well below pre-pandemic levels (see Chart 2).
The major increase in WHM visa grants were to UK nationals to 20,090 up from 7,433 in 2020-21 but well below pre-pandemic levels of well above 35,000 per annum (see Chart 3).
Visa grants to other major WHM agreement nationals were:
- Canada: 3,295 up from 1,042 in 2020-21 but still well down on 7,477 in 2018-19;
- France: 10,087 up from 4,399 in 2020-21 but still well down on 24,413 in 2018-19;
- Germany: 6,798 up from 1,834 in 2020-21 but still well down on 21,152 in 2018-19;
- Hong Kong: 1,040 up from 415 in 2020-21 but still well down on 2,167 in 2018-19;
- Ireland: 10,491 up from 3,697 in 2020-21 and not too far down on 11,077 in 2018-19;
- Italy: 5,792 up from 2,619 in 2020-21 but well down on 10,797 in 2018-19;
- Japan: 5,170 up from 1,558 in 2020-21 but well down on 11,933 in 2018-19;
- South Korea: 5,932 up from 2,212 in 2020-21 but well down on 21,380 in 2018-19;
- Netherlands: 1,952 up from 618 in 2020-21 but well down on 5,251 in 2018-19; and
- Taiwan: 5,142 up from 3,765 in 2020-21 but well down on 18,239 in 2018-19.
It would be reasonable to expect that WHM visa grants in 2022-23 will again rise significantly on 2021-22 levels but unlikely to get anywhere near the peak of 2012-13 even though WHM visa grants are uncapped and a second and third WHM visa can be obtained without having to work on farms.
W&H visa grants also increased strongly in 2021-22 to 17,463 compared to 8,379 in 2020-21 and 28,813 in 2018-19 (see Chart 4).
The USA is a major source country for W&H visa grants as it is managed on a demand driven basis. There were 3,306 W&H visa grants to US nationals in 2021-22 compared to 894 in 2020-21. The peak year for W&H visa grants to US nationals was 2015-16 with 8,669.
Another major source country for W&H visa grants is China which has a cap of 5,000 first W&H visa grants. But W&H visa grants out of China are recovering only very slowly to just over 1,000 in 2021-22 (see Chart 5).
The Morrison Government announced that in 2022-23, caps for W&H visas would be increased by 30 percent. It also announced an expansion of agreement countries to include India.
If this policy is retained by the new Government, we can expect W&H visa grants to rise very strongly in 2022-23.
The WHM and W&H visa contribution to net overseas migration and flow on to permanent migration is likely to rise with this.
A key uncertainty will be whether the labour market remains strong. A weaker labour market would limit growth and increase risks of exploitation.