The lies driving Big Australia (members)

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By Leith van Onselen

Business Spectator’s Rob Burgess published another nice spruik for a “Big Australia” over the weekend, arguing that lowering Australia’s high skilled migration intake would cripple the economy:

Angela Chan, national president of the Migration Institute of Australia says… Employers in regional and remote Australia find it extremely difficult to fill positions with workers who have families, homes and lives in our capital cities – cities that house the unusually high figure of 85 per cent of our population…

What makes a direct link of migration and jobless numbers most worrying, according to Chan, is that towns that don’t have medical staff, accountants, engineers or other skilled workers are hobbled economically – the businesses that would otherwise employ the low-skilled, or even many other classes of skilled workers, don’t get going.

Viewed in this context, it can be argued both that we have a huge unemployment problem to solve, and that it will only be made worse by choking off skilled migrants who are just as prepared to set up house in Bendigo or Mount Gambier as Melbourne or Adelaide.

That is not to argue the all skilled migrants are wanted or needed – just that there are good reasons to keep the flow higher than many would assume in hard times.

…there is a lot more to the migration-jobs nexus than meets the eye.

I would accept Burgess’ arguments if these so-called “skilled migrants” were locating primarily in regional areas, some of which are crying-out for doctors, nurses, and the like. However, we all know that this is not the case, and that most migrants are settling in Australia’s major capitals. Moreover, many of the visas that have been granted over the past five years – such as for cooks, chefs and hairdressers –  are not exactly roles that will improve the nation’s competitiveness. They are also roles that could easily be filled by locals subject to adequate training. And to add insult to injury, some of the visas granted are for occupations that are experiencing significant oversupply, such as accounting.

There was arguably a strong case for skilled migration when Australia was in the full throws of the mining boom. Up until the GFC, total employment grew faster than the labour force, suggesting genuine labour shortages. However, since the GFC, total employment has grown much slower than the labour force, which is indicative of a slack labour market and is why the unemployment rate has been rising (see next chart).

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It is also why the Department of Employment believes that the number of occupations suffering skills shortages is at an “historic low”, with employees reporting that “there were generally large fields of applicants vying for skilled jobs and employers filled a high proportion of their vacancies” in 2013-14.

To continue to promote a high skilled migration intake when the labour market is weak, particularly in roles that could easily be filled by locals, makes absolutely no sense. It is also particularly egregious when youth unemployment is running at nearly 14%:

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And the number of jobs for Australia’s youth has been falling:

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More broadly, Burgess has taken no account of the impacts on Australian living standards from our high immigration policy.

A big negative of Australia’s high rate of population growth is that it is placing increasing pressure on the pre-existing (already strained) stock of infrastructure and housing, which reduces productivity and living standards unless costly new investments are made. Further, controversial and expensive investments like desalination plants and road tunnels (e.g. the East-West Link) would arguably not have been required absent such strong population growth.

Further, when infrastructure and housing investment fails to keep up, it places upward pressure on inflation, requiring higher interest rates, which can then damage productive sectors of the economy. As explained in a 2011 speech by the Reserve Bank of Australia’s Phil Lowe (summarised here), these factors were certainly in play in the late-2000s, when rapid population growth placed upward pressure on rents, as well as caused a big surge in utilities prices as the capacity of the system struggled to keep pace with the growing demand, requiring costly new investments.

Ongoing high population growth also places additional strain on the natural environment, causing greater environmental degradation, increasing water scarcity and pollution, and making it more difficult for Australia to reduce its carbon footprint and meet international pollution reduction targets.

A bigger concern is that Australia earns its way in the world mainly by selling its fixed mineral resources (e.g. iron ore, coal, natural gas, and gold). More people means less resources per capita. A growing population also means that we must deplete our mineral resources faster, just to maintain a constant standard of living.

Finally, modelling by the Productivity Commission has also found that immigration is neither beneficial for the economy or living standards, nor can it alleviate the impacts of an ageing population.

All of which raises the question: what is the end-game of Australia’s migration-based economic model? If all we are doing is growing for growth’s sake, pushing against infrastructure bottlenecks, diluting our fixed endowment of minerals resources, and failing to raise the living standards of the existing population, where does it lead?

High immigration and population growth is fine if it is part of a grand plan. Otherwise, it is not a genuine economic driver, but rather a way of creating the illusion of growth; of sliding backwards without anyone really noticing.

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Unconventional Economist

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