Population ponzi: the elephant missing in the election


By Leith van Onselen

Last week,­ Essential Research released an opinion poll commissioned by SBS, which showed that the overwhelming majority of Australians do not support the high levels of immigration experienced over the past decade:

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As shown above, 59% of Australians surveyed believed that “the level of immigration into Australia over the last ten years has been too high”, more than double the 28% of Australians that disagreed with that statement.

Over the past decade, Australia’s population has grown at one of the fastest rates in the developed world and far above the historical average:

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We were told that Australia needed high immigration to supply it with necessary skills during the mining boom. And yet, the mining boom is long gone and Australia’s immigration intake remains highly elevated.

Worse, the lion’s share of the population growth has poured into Australia’s two biggest and already most overcrowded cities: Sydney and Melbourne:

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With Sydney and Melbourne, in particular, straining under under the weight of continual high population growth – think widespread infrastructure bottlenecks, rising congestion, and record low housing affordability – it’s amazing that the population ponzi has been ignored in this year’s Federal Election campaign.

It’s not like all these extra residents piling into our cities are boosting material living standards.


While headline GDP growth across Australia has held-up reasonably well over the past decade, thanks to high immigration, per capita real GDP has trending down so sharply that is has fallen to levels not seen since the early-1980s recession:

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Effectively, all rapid immigration has done is create the illusion of growth, along with a boom in congestion. Meanwhile, individual living standards have slid backwards.


Meanwhile, our two biggest cities have become less productive, as evident by their woeful trade performances. Merchandise exports in both states have recorded tepid growth, whereas each state’s trade deficits have blown-out enormously. This suggests that both Sydney and Melbourne are effectively sucking financial resources from the mining states in order to support their respective population fetishes (see below charts).

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In other words, as rampant population growth has flooded Sydney and Melbourne – with the lion’s share of new arrivals working in non-productive “bullshit” services jobs – exports have stagnated and the trade balance has deteriorate sharply as more and more services workers purchase imports, like cars and TVs, without earning the nation export income.

I know what you are thinking: but Australia is experiencing a services exports boom, right? Well actually, the services trade balance is stuck firmly in deficit too:

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We also shouldn’t forget that Australia’s fixed mineral endowment (resources base) – the main driver of our wealth – is diluted by mass immigration. For example, if the population doubles over the next 40 years, then this implies that Australia’s per capita resources base will be diluted by a corresponding amount. It also means that our fixed endowment of resources must be sold-off twice as quickly just to maintain our standard of living, other things equal.

Ultimately, Australia’s population ponzi is the epitome of an unsustainable economic model, whereby an illusion of growth has been created, along with a boom in congestion. Meanwhile, individual living standards are sliding backwards.

The electorate seems to be catching on, if the above opinion poll is anything to go by. It’s about time our political representatives do too.


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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.