And the main thing supporting headline GDP growth is high immigration.
Indeed, since the GFC, 70% of Australia’s growth in headline GDP has come from growing the population, rather than improved productivity:
Effectively Australia’s high immigration program has maintained the illusion of growth. But what is the point of growing the economic pie if everyone’s share of that pie is not increasing sufficiently?
Finally, what do we make of Uren’s claim that:
This elasticity in the labour force — with the size of the temporary workforce ebbing and flowing according to labour demand — helped Australia to get through the unprecedented terms of trade boom without inflation, saw it sail through the GFC without recession and is helping it to adjust now to a slowdown in the economy that in earlier times would have seen unemployment rise far higher.
“Helped Australia to get through the unprecedented terms of trade boom without inflation”. Nope.
When infrastructure and housing investment fails to keep up with population growth, 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.
“Saw it sail through the GFC without recession”. Not in per capita terms, which is what matters to the average Australian.
“Is helping it to adjust now to a slowdown in the economy that in earlier times would have seen unemployment rise far higher”. Absolutely, which is exactly what lower immigration does. So why did you claim earlier that “the influx of migration stopped unemployment rising” during the GFC? You have contradicted yourself, Mr Uren.
While not mentioned by Uren, I will also add once again 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.
It’s about time that Australia’s economists and policy makers acknowledged that high immigration is not an economic bonanza, and is in fact more likely to damage productivity and living standards. Ross Gittins has done so, as has the The Australia Institute’s chief economist, Richard Denniss.
If all Australia is 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 is the benefit?