There has been a dramatic shift in the composition of immigrant flows to Australia over the last two decades. Between 1990 and 1995 Australia halved its intake of permanent migrants from 120,000 per year to around 60,000. From 2000, however, the intake accelerated to an annual inflow of 140,000 immigrants in 2006. Significantly, nearly all of this expansion was due to people entering under the skilled-migrant category, with little change in the family-reunion category (Productivity Commission 2006). This rapid change in migrant selection policies towards skilled visas implies an increase in the average skill level of immigrants. In particular, as shown by Birrell et al (2006), there has been a dramatic increase in the net inflow of 'Professionals', particularly building and engineering professionals and teachers.

What are the benefits of this change in composition of migrants toward skilled visas? The aim of this paper is to provide a brief survey of economic perspectives of the costs and benefits of importing skilled labour, focusing, in particular, on the recent study by the Productivity Commission (2006) and the ensuing debate. I will argue that there has been insufficient attention given to the distributive consequences of immigration and, in particular, to the effects of skilled migration on the domestic education sector.