Salt of the ponzi

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By Leith van Onselen

I appear to have provoked a little backlash from Bernard Salt after my recent article congratulating him on recognising the downsides of rampant population growth. “Unabashed supporter of a bigger Australia”, Salt reckons he has a solution to Australia’s deteriorating economy: ramp-up the population ponzi. From The Australian:

With population growth coming off a recent high base the housing industry must feel like the world is closing in…

It is only a matter of time before slack housing demand results in rising unemployment and into festering discontent in the nation’s outermost edges. Discontent flourishes wherever good times suddenly turn bad; it’s all someone else’s fault! It takes the punters and their political administrators quite some time to adjust to the new reality of a cold new world where commodities are less loved.

I think that given our current situation, which seems to be getting worse every day with falling commodity prices, we should ramp up immigration from about 200,000 annually today to about 240,000.

Seriously, you can’t make this stuff up. To Salt, all Australia needs to do is import more people, build houses and infrastructure for them, and sell cappuccinos to one another, and everything will be sweet.

There’s no mention of the hit to productivity and living standards as infrastructure capacity constraints worsen, causing dis-economies of scale. There’s also no mention of how Australia will pay for the additional imports that the extra people will buy, or the deleterious impacts on housing affordability and amenity (think smaller, more expensive homes and/or living further out).

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To Salt, the extra population is good because it adds to overall GDP, even if GDP/income per capita – which are what matters to living standards – are unchanged or fall.

What Salt proposes is nothing more than a ponzi scheme, not real and sustainable growth.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.