CEDA turns population ponzi booster

By Leith van Onselen

The Committee for Economic Development Australia (CEDA) is the latest lobby group to call for Australia to raise its immigration intake, releasing a new report entitled Migration: The Economic Debate.

Examining CEDA’s website reveals that the report’s major sponsor is business immigration firm Fragomen Worldwide, which according to its website:

“We build bridges that transcend borders…

At Fragomen, we don’t just facilitate immigration—we create opportunities. From individuals and small local businesses to the world’s largest companies, we support all of your immigration needs, all over the world”…

Below is the CEDA report’s Executive Summary:

Australia has absorbed an estimated 10 million settlers since the First Fleet arrived in 1788. The majority of these settlers, some seven million, have come to Australia since 1945.

Post-World War II, the immigration program was focused on nation building. Over time, the “populate or perish” approach was replaced with a focus on Australia developing a predominantly skill-based formal selection system for permanent migration.

Australia now takes a disproportionately large component of the world’s migration flows, with significant economic and social consequences for the country. Despite Australia comprising only 0.3 per cent of the world’s population, 2.8 per cent of the world’s immigrants live in Australia. There are now more people living in Australia who were born overseas, as a portion of the population, than at any other time in the last 130 years. This is the highest portion in the world, after Israel.

The migration program has favoured skilled migrants over family reunion since 1997–98. Over this century there have been 1,464,622 skilled migrant visas issued with 753,691 family stream visas. Over the same period, 205,987 humanitarian visas were issued, slightly more than nine per cent of the total visas issued this century.

In line with global trends in people movement, temporary migration has become the dominate element of Australia’s immigration program. Strong demand growth means that temporary migration into Australia has eclipsed permanent flows since the mid-2000s. Australia’s temporary migration program is uncapped and allowed to fluctuate with the level of demand for individual visas.

Temporary migrants constitute four main categories: 457 visa holders, New Zealanders, working holiday makers and foreign students. The numbers entering are determined by the demand from employers for 457 workers, by international students for Australian university education and by the number of young people wanting a working holiday in Australia. The stock of temporary migrants at any point in time is 10 times greater than annual permanent entry of around 190,000 and has represented up to almost 25 per cent of the labour market in certain age cohorts at points in time.

Almost unique among developed economies, Australia’s migration program has enjoyed very strong community support and is perceived to have contributed to the economic development of the nation. According to the Organisation for Economic Co-operation and Development (OECD), this support is partially explained by the best practice nature of Australia’s immigration program.

Unfortunately, in many parts of the western world including Australia, fears of migration, and its perceived adverse consequences on local populations, are on the rise. These fears about migration, globalisation and digital disruption have spawned the emergence of political parties with skewed perceptions on the economic and social benefits of immigration, and threaten to undermine Australia’s longstanding migration program.

Additionally, key aspects of the current migration program have the potential to undermine its community acceptance and fuel these fears. An overreliance on poorly regulated market driven components of the program and the very substantial pools of relatively unregulated temporary migrants create opportunities for exploitation, as a growing number of high profile examples have proven, while also having economic consequences for some incumbent Australians.

CEDA’s research supports several of the conclusions and findings of the Productivity Commission Report No.77 Migrant Intake into Australia, released on 13 September 2016. That report noted there is scope for significant reforms within the current system that could deliver superior overall outcomes for the Australian community, particularly to:

  • Recalibrate the intake of permanent skilled immigrants by shifting to a universal points test while tightening entry requirements relating to age, skills and English language proficiency; and
  • Recognise that Australia’s migration policy is the nation’s de facto population policy and incorporate the economic and social consequences explicitly in future intergenerational reports.

To avoid further erosion of the bipartisan long-standing support for Australia’s immigration program, a best practice approach to the program must be maintained. This will involve rebalancing the immigration program and ensuring its integrity while also giving temporary migrants a fair go.

The report claims that annual permanent migration could be doubled over the next 40 years and deliver significant per capita economic benefit. However, this would require the migrants to be shifted away from the major cities into Northern Australia and the regions (yeah, good luck with that!). Currently, 30% of new arrivals to Australia flow to Sydney and 24% to Melbourne, and the report admits this is causing strain on services and infrastructure:

“It is questionable as to whether the current settlement patterns of migrants, predominantly into Sydney and Melbourne, can continue indefinitely with these figures… It is not possible under current planning and governance arrangements”.

Modelling in the report shows that the benefits associated with a larger population could be substantial, with the current migration program resulting in Australia’s per capita income being 5.9% higher than if there was zero net migration.

However, the report admits that there are significant costs to a bigger population that are not captured in the economic modelling:

Increasing the size of the population increases the number of people putting demands on fixed and renewable natural resources. As the supply of these resources is limited, a larger population can contribute to lower productivity and income per capita. Road congestion is a major concern to many Australians, particularly in the nation’s most congested cities of Sydney, Melbourne and Brisbane. Population growth in urban areas adds to congestion and can reduce the amenity of these cities. The costs of congestion, such as additional time spent travelling, uncertainty about travel times, accidents, and frustrations are real even if they are not measured in economic statistics of the nation’s overall wellbeing.

Likewise, urban utilities, such as water supplies, utilise the environment as a source of water (rain fed dams and groundwater), and waste disposal (ocean outfalls and landfills). As the population grows, the pressure on the environment means that more infrastructure is required to deliver the same level of services. This is particularly the case with reliable urban water supplies where Australia already has some of the largest reservoirs to population in the world. As annual demand approaches mean annual inflows, a much larger proportion of water requires engineering solutions. The costs of additional water are shared between incumbents and immigrants.

CEDA’s findings are basically the same as those presented in the Productivity Commission’s (PC) final Migrant Intake into Australia report, released in September (analysed here). In this report, the PC estimated that per capita GDP would be increased under current migration settings versus a zero NOM baseline. However, the PC also found that labour productivity would decrease as would real wages:

Compared to the business-as-usual case, labour productivity is projected to be higher under the hypothetical zero NOM case — by around 2 per cent by 2060 (figure 10.5, panel b). The higher labour productivity is reflected in higher real wage receipts by the workforce in the zero NOM case.
ScreenHunter_14902 Sep. 12 16.24

The PC’s major study on the Economic Impacts of Migration and Population Growth, released in 2006, also found that all of the gains from increased skilled migration flow to the migrants themselves and the owners of capital, whereas “the incomes of existing resident workers grow more slowly than would otherwise be the case”.

Moreover, the PC found that all of the economic benefits from immigration come from lowering the average age profile of the population and increasing the share of workers in the economy. However, these benefits are only transitory: as the migrants themselves grow old they will drag on growth after the forecast period, thus requiring ever more immigrants and a bigger population to offset population ageing (classic ‘ponzi demography’). To quote the PC:

“The continuation of an immigration system oriented towards younger working-age people can boost the proportion of the population in the workforce and, thereby, provide a ‘demographic dividend’ to the Australian economy. However, this demographic dividend comes with a larger population and over time permanent immigrants will themselves age and add to the proportion of the population aged over 65 years”.

Finally, the CEDA report presents 17 recommendations to better target the immigration system. These range from:

  • Influencing Australia’s settlement pattern, with particular beneficial impacts of migration in regions and Northern Australia;
  • Consideration of the impact of the current migration program on Melbourne and Sydney and subsequent future infrastructure and services requirements;
  • Providing a more robust model for determining occupation shortages with respect of 457 visas;
  • Shifting to a universal points test for permanent skilled migrants and tightening entry requirements relating to age, skills and English-language proficiency;
  • Reviewing and capping the working holiday visa program and possibly introducing a purpose built guest worker program for specific industries struggling to attract adequate low-skilled workers;
  • Increasing penalties for exploiting migrant workers; and
  • Improving settlement services and support, access to English language programs and recognition of foreign qualifications.

It is important to note that CEDA markets itself as “a respected independent national organisation with an engaged cross-sector membership. For more than 50 years, CEDA has been delivering leading thinking, informed discourse and rigorous research on the issues that matter… CEDA is not restricted by vested interests or political persuasion… CEDA focuses on driving debate and critical analysis of the most important topics of the day”.

I offered to present to CEDA the opposing view that maintaining such high levels of immigration is not in Australia’s interest. However, I was knocked back, presumably because my views do not align with the growth lobby’s agenda.

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Unconventional Economist
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Comments

  1. CEDA has published a report you don’t like. That doesn’t make them rent seekers. Rent seeking is the process of lobbying for the purposes of making money by having the rules set in your favour. CEDA doesn’t gain financially by Australia having more migrants. If you think they are wrong, say so, but ad hominem attacks just weaken your case.

    • Their sponsors are companies that benefit from higher immigration, like Fragomen. They also would not allow me to present the opposing view at any of their presentation lunches spruiking high immigration to be held around the country.

      CEDA may not directly “gain financially by Australia having more migrants”, but their sponsors do.

      Join the dots.

    • Wrong Frank.
      CEDA has published a flawed report serving the commercial interests of its major sponsor, while claiming to be “independent”.
      Exposing that undisclosed sham in plain, clear language is the role of the truly independent media.
      Good job Leith

    • Frank, CEDA is representing large pools of capital operating in property development, retail and attractive industries. If you don’t think that it is a cheer leader for lower wages and more customers, then you are poorly informed about how these industries rely on rapid population growth to leverage profit.

      Very little attention is paid to negative externalities by the CEDA thinking. CEDA treats the environment as part of the economy, supplying fresh water and absorbing waste from the economy, where the real situation is that the economy operates within the environment and is a wholly owned subsidiary of the environment in a way. Its finite, non-renewable or slowly renewing resources are tapped out, so that the economy harvests all the fruit each year and is now taking the branches from tree, while also reducing the health of the environment, which creates limits to economic growth.

      Well done Leith!

    • The point is, Frank. that Fragomen Worldwide is promoting its own business in the guise of an ostensibly independent organisation (CEDA).

      Further Fragomen Worldwide is thereby attempting to surreptitiously corrupt Australian society by encouraging high levels of immigration when zero immigration will most benefit Australia.

      Fragomen Worldwide is attempting to profit in its own business at the cost of, and to the detriment of, the Australian people and environment.

    • +1 Yes, thank you Leith for providing such articulate responses to the population ponzi spruikers nonsense.

  2. “The costs of additional water are shared between incumbents and immigrants.”

    WTF? I’ve been paying taxes for 37 years, some of which has gone to developing water infrastructure, along with every other bit of infrastructure in the country. Immigrants lob in and then drink the water that me and my fellow citizens have paid for over our lifetimes, while their contribution to developing addition water resources will be dwarfed by mine. That’s an unusual definition of “sharing”.

    This Fragomen crew deserve a good Rogering. Or perhaps fragging.

    • blacktwin997MEMBER

      Plus for a mere $50K a pop the immigrants can import their elderly parents to help mop up our troublesome excess healthcare, pensions and rule of law!

      • not only ancient parents but for 50K another parent and kids for K to 12 schooling and all the visas and perks forever with citizenship.

  3. And what if they are wrong ?
    When is this issue going to be put to the people and taken out of politicians hands.

  4. Neither CEDA, Treasury or the Productivity Commission are objective bodies.

    Their research into migration and population is highly ideological and political, and is fashioned to serve their masters.

    Be clear on this – we will NEVER, NOT EVER be allowed to have an open and honest conversation about population and migration in this country, because it is probably the KEY economic lever deployed by the ruling elite to maintain GDP growth, and underpin demand for this country’s key sectors – construction/development, finance and retail.

    The other key thing to understand is that this country has only been able to lower federal personal tax rates by creating tax-farming opportunities for the private sector (e.g. education, health, roads), the viability and earnings targets of which are underpinned by assumptions around higher levels of population growth (i.e. immigration) than the public would ever support if it were given the choice in a plebiscite.

    What we will continue to get instead is propaganda and suppression of subversive movements that are opposed to high levels of immigration.

    This propaganda is being supported and funded by neoliberal think thanks, FIRE sector lobby groups funded directly by banks, developers, construction companies, property agents, retail sector, and organisations such as Fragomen, all of which have a purposeful political and financial agenda.

    The propaganda is always predicated in terms of scaring the population about a reduction in our standard of living, but this is the great bogeyman nobody ever actually interrogates.

    What would a reduction in our standard of living actually look like with a net migration intake of just 50,000 per year ?

    Are we really prepared to sell the cultural heritage of this country out for an additional nominal GDP per capita of $1,000 per year ?

    Australians don’t have to cop this. There is no law against being unwelcoming to the Chinese and Indian diaspora (physical and verbal abuse aside), in fact the LNP is looking to liberate Australians to truly express their voices freely with regard to their view on particular ethnic groups. Make the most of it. And if the morons in One Nation need to be the agent for change, so be it.

    And if you don’t want this country to be 50% ethnic Chinese and Indian by the turn of the century, then better resolve yourself to what is required politically, and what you are prepared to forgo.

    • A really, really great post.

      We have reduced our standard of living after moving ex Melbourne (I personally am earning more absolutely but on a relative basis am probably 20-30% behind where I would have been).

      However:
      – will be pulling mangos from trees in the next couple of months
      – endless avos on tap
      – valley views, no neighbours, no noise
      – no traffic light commute

      Arguably a much, much more fruitful life (rather than existence).

    • Ronin8317MEMBER

      If we maintain the current rate of immigration, it’ll be 50% long before turn of the century, more like 2050?. Being racist will just make this happen even faster as all rational arguments becomes a name shouting match. Given where most of Australia’s export are going, being racists to your biggest customer is not an economic option.

  5. It seems obvious to me that a growing aged voting bloc will reject any massive increase in our NOM. Just saying….

    • Given the reports references to:

      ‘Unfortunately, in many parts of the western world including Australia, fears of migration, and its perceived adverse consequences on local populations, are on the rise.’

      and
      ‘Additionally, key aspects of the current migration program have the potential to undermine its community acceptance and fuel these fears. ‘

      and

      ‘To avoid further erosion of the bipartisan long-standing support for Australia’s immigration program, a best practice approach to the program must be maintained.’

      the report authors are well aware of this problem, and probably aware the difficulty of more than doubling NOM in a world where the number of desirable immigrants (good skills, relatively young, good English language skills) is dwindling.

  6. Here’s the an excerpt from in the conclusion from the chapter by Glenn Withers, an actual respected economist

    “Recent political trends here and overseas show that undue privilege and lack of transparency is eroding public trust. It can be restored by good, well-explained and transparent policy.

    The policy approach here would
    Expand immigration gradually over time in-line with population, but conditional upon complementary policy advance that addresses adverse consequences of population growth such as infrastructure provision, urban congestion and environmental degradation”

    Note carefully: “conditional upon”,

    The report is on the CEDA website. Anyone with an open mind can read it and judge for themselves whether CEDA is rent seeking.

    • Sure Frank, lip service is given to those things. But the underlying message from CEDA is that Australia should boost its immigration intake, which aligns with its growth lobby sponsors.

      The sensible message that CEDA should have conveyed is that Australia should reduce its immigration intake until the problems it cites are corrected and then revisit the issue.

      It would be nice if, just for once, these types of reports did not put that cart before the horse. We’ve had 12 years of rampant immigration with minimal infrastructure investment, and the chances of this imbalance miraculously turning around are buckleys and none.

    • Where is the evidence that increasing the population is the only way to improve the standard of living of the the existing residents?

      • Yep its a just a lazy (probably ineffective at the moment) way but also for the goverments to inflate away their deficits or support oganic growth.
        Yet despite the endless justification from rent seaking expert mouthpieces the adverse effects are being seen by the great unwashed and in so doing diluting their ability to influence.

    • Glenn Withers would not know if a brick shithouse fell on him. I endured his presentation in ’12 when CEDA did its last population review and this is my response to him:

      A Stable Australia: Sustainable, Resilient & Prosperous
      3rd of April 2012

      Professor Glenn Withers spoke to CEDA’s latest major research report, the confidently titled “A Greater Australia: Population, policies and governance” when he addressed a small group of CEDA members and invited guests in the offices of ANZ in Perth on 26 March 2012. Alarmingly, just four sentences into his introduction he veered off topic to mention race, multiculturalism and Pauline Hanson. Given that the group assembled were under the impression that Dr Withers was to speak about population, his move towards a discussion on immigration issues seemed to be a diversion for the topic of population.
      Disappointingly for the attendees, Dr Withers seemed to have dusted off an old set of slides for his presentation that appeared to be at least 10 to 15 years out of date. The data Withers presented would have been confusing and at worst, misleading to an audience, expecting to hear up-to-date information on population from this expert in the field. Perhaps he would have been better served to quote from his closing section to the CEDA report, in which he notes that “Our cities rate well in Liveable City rankings” and make special mention of the fact that Adelaide, with its relatively small population and low population growth rate, has usurped the positions of rapidly growing Sydney, Perth and Melbourne on this scale.
      In exploring scenarios for the future of Australia’s population, Dr Withers presented a graph of old data representing a low growth trajectory with a population stabilising at between 20 and 21 million, which he curiously and pejoratively labelled as the “Hanson option”, while the other growth scenarios were simply labelled options 2 and 3. This old data was most confusing and showed great disrespect to an audience that might have taken the data as accurate, especially since Australia’s population is set to hit 23 million in July 2012, while it clearly referred to a much older projection with little illumination to current trends. One wonders why Dr Withers did not show some respect to his audience on this important topic and at the very least update his projections. Another of Dr Wither’s slides appeared to show that Australia’s natural population growth is currently 80,000 pa, when in fact natural population growth (births minus deaths) is almost twice that amount, with two births for each death at the current run rate.
      In fairness to Dr Withers, he juxtaposed opposing quotes from former Australian of the year, earth scientist and palaeontologist Dr Tim Flannery with former Prime Minister Malcolm Fraser. Dr Flannery was quoted as saying that Australia would be in a much more resilient position to cope with an uncertain future with a population of between 6 and 12 million, while Fraser was quoted saying that Australia needs 50 million people. Dr Withers seemed to give equal weight to the ramblings of a former politician, who may once have enjoyed strutting the international stage as the leader of a ‘significant’ nation, with that of a man who has a deep knowledge of biology and the complex interactions within the web of life on our planet and who had studied the rise and fall of human civilisations. The juxtaposition of these quotes and their dismissal by Dr Withers was clear evidence that he would not be influenced by someone who could be trusted on the topic because of his deep knowledge, but preferred to throw up another smokescreen by referring to the opinion of a person who has no basis for making any meaningful contribution.
      When asked at what level Australia’s population might stabilise, Dr Withers offered that his projection to 2050 was for 35 million, at which point the population would somehow stabilise, however it was not clear just how that target would be realised, given his call for ongoing net migration at or around 200,000 per annum. Under these conditions, Australia’s population would continue to rise by about 1 million every three years and a stable population could only be achieved if deaths were to outnumber births by in excess of 200,000 pa, which would clearly be unacceptable. Boosting Australia’s demographic pyramid with even a small number of net migrations would in turn flow through to an increase of natural population growth as Australia’s 20 to 35 year old cohort expanded.
      Turning to the 232 page CEDA report, Dr Withers again appears to be one million people behind the times when he says that “… we start now at a population of about 22 million.” But he is quite correct to say that “. . . total population is indeed a matter of public choice”, and the public do indeed deserve a choice, which is currently denied to them. A survey conducted by McCrindle Research in February 2012, using a nationally representative survey of 1,118 Australians, as well as focus groups across three generations, found that 73% of Australians and 81% of all women, prefer a stable population of around 26 million by 2050; rather than Australia’s current rate of growth, which will see it exceed 36 million by 2050.
      Elsewhere in the CEDA report, Jonathan Pincus and Judith Sloan find as previous reports have done, that migration does not bring any net benefit to Australia’s wellbeing per person, stating the rather anodyne conclusion that “Overall, there is an argument, albeit not an overwhelmingly strong one, that a country can be well-served by implementing a measured migration program focused on skills.” Additionally, Mark Thomson looks at population and defence imperatives, concluding that “A substantial case for accelerating the growth of Australia’s population cannot be built on the basis of defence considerations”.
      CEDA’s population report suffers from a narrow catchment area for ideas and the omnipresence of those members, whose livelihoods often depend on population expansion or “dumb” growth, rather than smart growth. Smart growth does not require additional people, but relies on innovation and adaption to produce a more resilient and sustainable community that is more able to cope with the many, fast approaching challenges to our society.
      John Langford and Nathan Taylor look at water security, noting that “World food prices are likely to continue to rise, due to a combination of falling rates of growth in agricultural productivity, increasing global population, climatic changes influencing (reducing ed.) the amount of arable land and useable water, . .”. Importantly they note that while the production of cereals expanded by 2.8 times between 1961 and 2009, population more than doubled and per capita incomes tripled, equating to roughly a sixfold increase in demand over the same period. The report goes on to note that four of the lowest seven annual inflows of water into the Murray Darling River system ever recorded, occurred over a seven year period from 2003 to 2009 inclusive, which is hardly a ringing endorsement for the nation’s ability to feed an ever larger population.
      The report’s fatal flaw is its agnosticism on global population trends which sees an annual increase of 80 million per annum and its ignorance of mounting restrictions to the supply and availability of non-renewable, finite, natural resources such as oil. CEDA needs to urgently turn its attention to developing a policy to support a more resilient Australian economy, which relies on smart, innovative growth that enhances the quality of its citizen’s lives and not fat dumb growth that reduces the quality of their lives.
      An aging population in Australia should be welcomed as a sign of success and presents no reason to further boost population. Today, families are smaller than in generations past and more women are permanently in the workforce, reducing dependency ratios. The great majority of elderly people have a much shorter period of dependency than do our children and there are fewer of them than the under-18s. ABS figures show that all children aged 0-9 are highly dependent on others for their daily care while most people aged 65-84 are not.
      If sustainable development does not compromise the ability of future generations to meet their needs, then this maxim should underpin Australia’s public policy. An ever expanding population will not fit a model of sustainability, only a stable population will enable that policy outcome.
      Almost all aspects of our industrial society depend on petroleum, so that as Richard Heinberg has pointed out, peak petroleum production will be quickly followed by Peak Everything(1). In particular, modern agriculture, with its mechanisation, irrigation often requiring expensive pumping and petroleum based pesticides and fertilisers, is completely dependent on petroleum, so the imminent peak of world petroleum production will be followed by the peak of world food production. Australia will then be faced with a spectre of declining world food production while at the same time the world’s population is expected to continue to grow. This is surely a recipe for famine and conflict.
      Peter Strachan; BSc, Dip Applied Fin, SF Finsia, AFSAA

      1 Richard Heinberg, Peak Everything; Waking up to the Century of Declines (New Society Publishers, Canada, 2007).

  7. Also being reported at the SMH with comments disabled!

    Two PC reports say the immigration effect is bs.

    Edit: sorry, the Guardian.