NAB should know better than this. Any economist with half a brain knows that partial analysis is fallacious thinking. The economy is a river, not a lake, and when you change one feature, then others are also alterered:
Spending by international students accounted for more than half of Australia’s economic growth in 2023, according to new research warning that a sharp increase in visa refusal rates will be a headwind to growth this year.
GDP growth slumped to an annual rate of 1.5% in December 2023, the Australian Bureau of Statistics said this week, as non-essential spending and home building activity contracted in response to the fastest interest rate tightening cycle in decades.
…NAB senior economists Brody Viney and Taylor Nugent said about 40% of spending by international students was tuition fees, while the remaining 60% was on the consumption of goods and services in Australia.
Let us imagine that none of these students arrived. In that case:
- wages would be slightly higher if still falling back, boosting wider consumption;
- the rental shock would be considerably less severe, boosting the spending power of 9 million renters;
- rents are the second largest single input into the CPI, so slightly lower interest rates would boost spending by another 10 million mortgage holders.
Also, ABS calculations for foreign student spending are laughably thin-sliced. Many of these kiddies come not to study but to work. So, they’ve taken a job from a local, which dents local consumption even more.
This is especially true of the flow this year, which was dominated by poorer Indians and other Third World countries going to sham colleges, many of whom deliberately live in poverty to maximise remittances sent home.
They are not adding to demand; they are subtracting it. They are not exports adding income; they are imports subtracting it.
I don’t know if removing these factors would have led to a greater local contribution by consumption to GDP. But it does not take Einstein to see that boosting the purchasing power of 19 million Aussies would add at least as much demand as a lousy 300k capital-exporting foreign students.
Notwithstanding that, the consumption would have been undertaken by Australians, who vote for their government, pay taxes to fund their universities, and have borders to define what used to be known as “Australia.”
Illogic and “partial analysis” are the tools of the rent-seeker, not the national interest.
