Immigration is no “golden goose” for economy

By Leith van Onselen

Paul Kerin, an adjunct professor at Adelaide University’s School of Economics, has penned a ridiculous article in The Australian arguing that “immigration is the golden goose our economy needs”. Let’s dissect his arguments:

Immigration over recent decades has made today’s Australians much better off — and further ongoing immigration is critically important if we are to maintain and improve our future living standards.

Why the false binary? One Nation aside, nobody has argued to end immigration, just to lower it closer to the sensible and sustainable levels that existed prior to when John Howard dramatically increased the intake in the early-2000s:

Back to Kerin:

As the Productivity Commission noted recently, the impact of immigration on house prices has been exacerbated by state, territory and local governments’ failures to implement sound urban planning and zoning policies. These failures have constrained growth in land supply and land use intensity. Easing these constraints would grow the size of the pie we can all enjoy. Cutting immigration wouldn’t. It may reduce house prices, but would boost neither land supply not land use intensity; therefore, it would simply transfer wealth from sellers to buyers. In fact, it would actually shrink our pie.

This is nonsensical. Under Australia’s current mass immigration program, Australia will need to add a Canberra-worth of infrastructure and housing every year simply to keep up with population growth, with Sydney’s and Melbourne’s populations projected to grow by a whopping 87,000 and 97,000 people per year respectively for decades to come:

You don’t have to be a rocket scientist to see that it is virtually impossible for housing and infrastructure to keep up with such strong population growth, even with the world’s best planning system.

Back to Kerin:

Unfortunately, those who favour immigration cuts have sometimes used fears that immigrants might steal our jobs or depress wages as Trojan horses to advocate for a position they help anyway…

Nor does the evidence support fears that immigrants steal locals’ jobs and reduce wages. Consistent with the findings of international studies, the [Productivity] Commission concluded that immigration has negligible effects on the wages, employment and workforce participation of local workers…

The evidence indicates that immigration raises GDP per person, even in the short run. The Productivity Commission has estimated that a 0.6 per cent NOM rate (Australia’s long-run average) would increase GDP per person by 7 per cent ($7000) in the long run. That’s not to be sneezed at, but some advocates of immigration cuts have snorted.

A higher NOM rate would boost GDP per person further. The commission estimated that a 1 per cent NOM rate would raise GDP per person by 10 per cent in the long-run.

The Productivity Commission’s (PC) various modelling over the years has shown that the benefits of immigration flow to the migrants themselves and the owners of capital, whereas incumbent residents are left worse-off.

The PC’s latest Migrant Intake Australia report, released in September 2016, compared the impact on real GDP per capita from:

  • Historical rates of immigration, whereby population hits 40 million by 2060; and
  • Zero net overseas migration (NOM), whereby population stabilises at 27 million by 2060.

The PC’s modelling did find that GDP per capita would be 7% ($7,000) higher by 2060 under current immigration settings. However, all the gains are transitory and come from a temporary lift in the employment-to-population ratio.

More importantly for incumbent workers, labour productivity and real wages are projected to decrease under current immigration settings versus zero net overseas migration (NOM):

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

Therefore, according to the PC’s latest modelling, high immigration improves per capita GDP by 2060 by boosting the proportion of workers in the economy, but this comes at the expense of lower labour productivity and lower real wages.

Moreover, beyond the forecast period (2060), the migrants will age and retire, thus dragging down future growth – classic ‘ponzi demography’.

In 2006, the PC also completed a major study on the Economic Impacts of Migration and Population Growth, which modeled the impact of a 50% increase in the level of skilled migration over the 20 years to 2024-25 and found that “the incomes of existing resident workers grow more slowly than would otherwise be the case”. Here’s the money quote:

The increase in labour supply causes the labour / capita ratio to rise and the terms of trade to fall. This generates a negative deviation in the average real wage. By 2025 the deviation in the real wage is –1.7 per cent…

Broadly, incumbent workers lose from the policy, while incumbent capital owners gain. At a 5 per cent discount rate, the net present value of per capita incumbent wage income losses over the period 2005 – 2025 is $1,775. The net present value of per capita incumbent capital income gains is $1,953 per capita…

Owners of capital in the sectors experiencing the largest output gains will, in general, experience the largest gains in capital income. Also, the distribution of capital income is quite concentrated: the capital owned by the wealthiest 10 per cent of the Australian population represents approximately 45 per cent of all household net wealth…

The PC’s latest report also noted that there are many costs associated with running a high immigration program that are not captured in the modelling but are borne by the incumbent population and unambiguously lowers their welfare:

High rates of immigration put upward pressure on land and housing prices in Australia’s largest cities. Upward pressures are exacerbated by the persistent failure of successive state, territory and local governments to implement sound urban planning and zoning policies…

Urban population growth puts pressure on many environment-related resources and services, such as clean water, air and waste disposal. Managing these pressures requires additional investment, which increases the unit cost of relevant services, such as water supply and waste management. These higher costs are shared by all utility users…

Immigration, as a major source of population growth in Australia, contributes to congestion in the major cities, raising the importance of sound planning and infrastructure investment …governments have not demonstrated a high degree of competence in infrastructure planning and investment. Funding will inevitably be borne by the Australian community either through user-pays fees or general taxation.

Hence, running a high immigration program becomes increasingly costly for existing residents. A classic example is infrastructure, where the PC in 2013 warned that total private and public investment requirements over the next 50 years are estimated to be more than 5 times the cumulative investment made over the last half century! Good luck with achieving that level of investment.

Kerin also fails to mention that Australia pays its way in the world primarily by selling-off our fixed mineral endowment. Importing more people necessarily means that Australia’s minerals base must be spread more thinly across a larger population, which necessarily makes Australians poorer (other things equal). Again, the PC has made similar observations:

Australia has considerable natural resources in regard to mineral wealth. As non-renewable resources deliver rents for those who extract them and for governments in the form of resource royalties and taxes on company profits, a larger population means those rents that are captured by government are shared across more people.

To illustrate, consider the below chart, which shows the breakdown of Australia’s exports, most of which come from Australia’s regions (i.e. commodities and agriculture):

Increasing the number of people via mass immigration does not materially boost exports but does increase imports (think flat screen TVs, imported cars, etc). Moreover, it requires Australia to sell-off our fixed mineral assets quicker to maintain a constant standard of living (other things equal).

Put another way, Australia would ship roughly the same amount of commodities and agriculture exports regardless of how many people are coming in as all the productive capacity has been set up and it doesn’t require more labour. So basically high immigration is wrecking the trade balance via more people coming in each year (mostly to Sydney and Melbourne) because of all the additional imports.

Anyone disputing this view only needs to look at the below charts showing the stalling of export growth amid the sharply deteriorating trade balances in NSW and VIC, which of course have been the primary destinations of migrants:

ScreenHunter_17044 Jan. 22 16.08 ScreenHunter_17045 Jan. 22 16.11

And, not surprisingly, this immigration has helped drive gigantic trade deficits in Australia’s two biggest states:

Meanwhile, the infrastructure deficits in both Sydney and Melbourne, along with congestion, housing affordability and overall liveability worsens each year as more and more people flood into each city and push against infrastructure bottlenecks amid woeful planning.

In short, growing bigger cities via immigration means a less competitive Australian economy and a wider current account – hardly a desirable situation.

Back to Kerin:

Immigrants also improve labour market flexibility. As they haven’t established roots, they’re more willing to move to where jobs are. As immigrants have different skill sets — and on average have significantly higher skill levels — they complement local workers, thereby raising their productivity and hence demand for them.

Again, Kerin is being loose with the truth. The PC’s latest report clearly showed that migrants are far more likely to settle in major urban areas than people born in Australia. Thus, it’s hard to argue that immigrants ‘flexible’ when they primarily come to Sydney and Melbourne only.

As shown in the below PC chart, 86% of immigrants lived in the major cities of Australia in 2011, whereas only 65% of the Australian-born population did:

ScreenHunter_17913 Mar. 13 16.00
Moreover, according to the PC, “of the immigrants living in capital cities in 2011, most lived in either Sydney or Melbourne, with 1.5 million residents of Sydney and 1.3 million residents of Melbourne born overseas”.

Second, the claim that immigrants “on average have significantly higher skill levels” is patently false.

The below chart does show that so-called “skilled” migrants made up around 129,000 of Australia’s 200,000 strong permanent migrant intake in 2016:

However, the PC’s latest report explicitly stated that around half of the skilled steam includes the family members of skilled migrants, with around 70% of Australia’s total permanent migrant intake not actually ‘skilled’:

…within the skill stream, about half of the visas granted were for ‘secondary applicants’ — partners (who may or may not be skilled) and dependent children… Therefore, while the skill stream has increased relative to the family stream, family immigrants from the skill and family stream still make up about 70 per cent of the Migration Programme (figure 2.8)…

Primary applicants tend to have a better fiscal outcome than secondary applicants — the current system does not consider the age or skills of secondary applicants as part of the criteria for granting permanent skill visas…

The PC also showed that while primary skilled migrants have slightly better labour market outcomes than the Australian born population in terms of median incomes, labour force participation, and unemployment rates, secondary skilled visas, and indeed all other forms of migrants, have much worse outcomes:

Another point that needs to be recognised is that the most popular categories of skilled migrants – accountants, engineers and IT professionals:

ScreenHunter_16433 Dec. 02 07.28

Are also the categories with the biggest surplus of workers:

ScreenHunter_16436 Dec. 02 07.49

Thus, the skilled migration system is destroying career prospects for local graduates in these (and other) areas.

Back to Kerin:

Advocates of immigration cuts sometimes cite long-term absolute numbers that sound big to scare us. For example, our population might well grow to 40 million in 40 years’ time. But you only need annual population growth of 1.3 per cent to get there. Such growth is eminently manageable; indeed, it will benefit us greatly.

Growing to 40 million mid-century sounds scary because it is. Such rapid population growth would see Sydney and Melbourne grow to 8 million people mid-century, creating infrastructure and housing havoc, crush-loading living standards.

Don’t take my word for it. Here’s former Treasury Secretary, Ken Henry:

“The Australian population is growing by something like 400,000 a year. Think of it: a new Canberra every year between now and the end of the century. Or, put it this way, every five years building a brand new city from scratch in Australia for 2 million people.

Or put it this way: building a whole new city the size of Melbourne every decade between now and the end of the century…

My observation in Sydney and Melbourne today, is that people already think, with very good reason, that the ratio of population to infrastructure is too high. But we have set ourselves on a journey that implies an increase in that ratio. An increase in that ratio that is associated with more congestion, longer commute times to work, increasing problems with respect to housing affordability”…

And here’s Journalist, political commentator and author, George Megalogenis:

“If most of the population growth that’s already in train for the next 10, 20, 30 years ends up in Sydney and Melbourne, we’ve got a problem…

You look at Sydney’s topography and it can’t fit another million people easily. And you look at Melbourne’s, and it will fit in another million but at the expense of livability because they just keep pushing the boundary out…

The default setting to me could potentially be catastrophic for the country over the next 20 years if people just end up in Melbourne and Sydney…”

Quite frankly you’d have to be delusional not to see the problems that come with growing Australia’s population by one million people every 2.5 years, as projected under current immigration settings.

Back to Kerin:

In any case, the 2015 Intergenerational Report contained much more scary numbers. It estimated that our dependency ratio (ratio of working age population to population aged 65-plus) will fall from 4.5 per cent to 2.7 over the next 40 years (even with 1.3 per cent average annual population growth); this will put an enormous burden on workers.

As immigrants are much younger than locals, they help to ease this burden by limiting the decline in the dependency ratio. This “demographic dividend” of immigration (as the commission calls it) is enormously valuable.

We’d be mad to throw away the substantial benefits that immigration provides.

Has Kerin been living under a rock? For more than a decade, the PC has debunked the myth that immigration can overcome population ageing:

  • PC (2005): Despite popular thinking to the contrary, immigration policy is also not a feasible countermeasure [to an ageing population]. It affects population numbers more than the age structure”.
  • PC (2010): “Realistic changes in migration levels also make little difference to the age structure of the population in the future, with any effect being temporary“…
  • PC (2011): “…substantial increases in the level of net overseas migration would have only modest effects on population ageing and the impacts would be temporary, since immigrants themselves age… It follows that, rather than seeking to mitigate the ageing of the population, policy should seek to influence the potential economic and other impacts”…
  • PC (2016): “[Immigration] delays rather than eliminates population ageing. In the long term, underlying trends in life expectancy mean that permanent immigrants (as they age) will themselves add to the proportion of the population aged 65 and over”.

In short, trying to overcome an ageing population through higher immigration is a Ponzi scheme.  It requires ever more immigration, with the associated negative impacts on economic and social infrastructure, congestion, housing affordability, and the environment.

To summarise, Kerin needs to recognise that it is the living standards of the incumbent Australian population that is the threshold issue in the immigration debate. Living standards in the major cities are unambiguously being eroded by mass immigration via negative externalities that are not captured in either the national economic accounts nor the economic modelling, such as increasing congestion, falling housing affordability, and environmental degradation.

If Kerin was my economics student I would give him a ‘D’ for only considering the benefits of immigration in a superficial way and completely ignoring the costs.

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Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. What ever came out of Adelaide Uni Economics? LOL! Who even is this person Kerin? Not worth discussing.

  2. Do not forget remittances – which hurts the trade balance.

    Male comes here to work for cash in restaurants/cafes and sends 10-20% of his income to his relatives in the 3rd world. Some may even send 40%.

    Thus boosting a 3rd world economy.

    Over 28% of AUS is foreign born. Remittances must have been a lot less when 18% of AUS was foreign born.

    http://www.hindustantimes.com/india-news/with-6-2-bn-wiped-off-remittances-to-india-experts-urge-govt-to-better-gulf-ties/story-3HYOtJaEqkECeDnOtf8UfL.html

  3. http://www.adelaide.edu.au/directory/paul.kerin

    Here is the profile of a very ordinary man. A rote learner, albeit a very accomplished rote learner. No big picture thinking here. Even timid conservative economists can have a go at virtue signalling.

    Honestly, I don’t know why you spend so much energy refuting these dumb-dumbs.

    • leith is playing spruiker whack-a-mole. his efforts are nothing short of heraculean and needed given people listen to these shills. we have the intellectual ammo we need to fight back thanks to him.

      • Thanks Stagmal. Believe me, I’d rather not waste my time responding to such articles. But someone has to call this BS out.

        Further, I was heartened to see a large amount of comments in The Australian debunking the author. Many had clearly read my work, which is motivating to me.

    • Hey – cut that man some slack … maybe that was a typo and he intended to write “Golden Noose” instead of “Golden Goose” 😛

    • Yes Prof Kerin appears to be a plain vanilla economics plodder — churned out from the university economics departments. But full credit to Leith for providing a comprehensive refutation. ‘Chase every rabbit down every hole’.

    • The more Leith refutes the dumb-dumbs, as you call them, the greater the chance that he will cut through the propaganda from the politicians and the mainstream media. Judging from the comments on Prof. Kerin’s article, he is succeeding. The only question is what inspired Kerin to set himself up for this.

    • Well, my guess is that he is more or less a hired gun. He probably sees it as an accomplishment to synthesize an argument for any desired spin direction.

      Definitely a propaganda war. The problem is that the headline is probably more effective than the content.

  4. Are the labels on the NSW and VIC import/export charts the wrong way around or is it too early in the morning for me to be trying to read charts?

  5. This is good substantial analysis, but I constantly demur on this point:

    “..it is virtually impossible for housing and infrastructure to keep up with such strong population growth, even with the world’s best planning system…”

    There is a working model already of population growth at least as substantial, accompanied by growth in housing and infrastructure, all the while that housing affordability (median multiple 3 to 4) is maintained. The MB team needs to stop being distracted from the possibilities.

    Here is some population growth data from 2000 to 2010 in exemplar cities:
    Atlanta: 3.5 million to 4.5 million
    Houston: 3.8 million to 5 million
    Dallas: 4.1 million to 5.1 million
    San Antonio: 1.3 million to 1.8 million
    Austin: 900,000 to 1.4 million
    Charlotte: 760,000 to 1.25 million
    Raleigh: 540,000 to 900,000
    Nashville: 750,000 to 970,000

    In New Zealand, there is a Labour Opposition Spokesman for Housing who regularly uses the terms “Metropolitan Utility District” and “Bond Financing”; in Australia, there is no politician who has yet bothered to get their head around these concepts (except perhaps Bob Day if you count him as a Politician), and very few advocates, even the best ones like the MB team. NZ has been fortunate to have had Hugh Pavletich going on like a stuck record on these points since around 2006. Enlightenment has slowly permeated through other advocates, the econ profession, official Inquiry teams, and into at least Labour’s Housing research team and their MP Spokesman. National, allegedly the party closer to “free market” principles, are a disgrace, unprincipled, venal, and crony-rentier capitalist enablers to the core.

    There is much more historically provable truth in the “immigration is beneficial” argument when 1) the free market actually IS rising to the challenge of providing housing and infrastructure because it is free to do so;
    2) when immigrants are not immediately entitled to freeload on government provisions based on a lifetime of pay-in via taxes; and
    3) when the host culture is sure of itself, and all policy is based on the expectation of assimilation.

    There is an entire “New World”, mostly Anglo, that is the fruit of sustained high immigration – how come this worked at all? Points 1, 2 and 3 applied, that’s all. I am not so much criticising the MB team, as criticising the “immigration is good” advocates who are making arguments that are heavily “conditional”, without shedding any light on what those conditions really are.

    • A substantial history on the Anglo New World, such as James Belich’s “The Anglo World and the Settler Revolution”, makes the very strong point that in this history, “growth” was itself an economic driver, full of multiplier effects. There was considerable cyclical volatility at times, to the degree that there were asset bubbles; however I argue that the post-automobile (and pre compact-city-planning) era abolished the urban land price boom-bust cycle, for decades in most of the first world, and continues to do so in the parts of the USA where compact-city planning has not yet done its toxic work.

      There is a small literature from Joel Kotkin, Tory Gattis and others, chronicling the rise of the USA’s “Opportunity Urbanism Growth Corridors”. It is a question how long the mainstream economics and punditry professions are going to take to recognise the phenomenon, if they ever do. Most of the west is well and truly on its way in the decadent “decline and fall” phase; the urban land price driven economic cycle has taken us back to 1870 – 1930, with each cycle being more destructive than the previous one. Spain today is the cautionary example, it is the 1930’s all over again there. But no-one is learning, there will be a “next time”, and “the last time” won’t be because we learnt and reformed, it will be because it got so big and destructive, it finished off the entire system. One just hopes that the USA’s sane regions survive somehow rather than get dragged down by the Coasts.

  6. There is money to be made out of bringing skilled migrants into Australia.

    Despite their being a huge oversupply of engineers (48 applicants per job vacancy in 2015) Engineers Australia makes around $3000 per skilled visa applicant in “vetting” their qualifications.

    Engineers Australia lobbies hard to persuade the government that their is a shortage.

  7. GunnamattaMEMBER

    From yesterday’s post, but goes here too……
    https://www.macrobusiness.com.au/2017/06/time-halve-immigration/#comment-2882460

    ……..as well as figure out where the intake best fits long term national goals.

    And that, in a nutshell, is where Australian politicians think it all becomes too hard.

    Frankly, I couldn’t give a shit if we decided to run migration at 500k per annum or cut it back to 5 people per annum – if only someone is prepared to be accountable and upfront about what is in it for us as a people, what the costs are for us as a people, and what the economic implications are for the economy we hand over to our kids……

    But Australian politicians aren’t prepared to do that – I see both the Torynuffs and the ALParatchiks as equally culpable in this. They aren’t prepared to look us (the Australian people) in the eye and state ‘we need more migrants so we have economies of scale for products we produce, or the skills and industries which will be in demand tomorrow’ along with something quantifying how many we need and why, and what the reporting measures of that need are – Maybe something like………

    We need an annual immigration intake of 70 thousand people per annum over the next five years, focused (10% – or 15 or whatever – of total migration per year) on (eg) IT and STEM skills provided:-
    – The national GDP grows at more than 3% per annum,
    – That no more than 10% of those immigrants live within 150 klm of Sydney, Canberra or Melbourne,
    – That the Australian IT development and industries using the STEM skills expand in relation to other sectors of the Australian economy by 2% per annum,
    – That those individuals are paying tax in Australia
    That one half of those immigrating are employed in export competing or import replacing sectors of the economy

    If we can sustain that demand for skills migration then we can have an additional 10% (or 15 or 20 or whatever) for genuine political refugees who would otherwise be facing persecution by authorities in their homelands.

    Provided that the economy is growing and generating the need for skills not currently available in Australia we can have family reunion immigration running at 25% (or 15 or 30 or whatever) of the total migration intake provided:-

    – The individuals are sustaining their life in Australia through endeavours undertaken in Australia.
    – The individuals are sustaining their life in Australia off the earnings of offshore endeavours which are accounted for by both Australian and the relevant foreign taxation authorities
    – That any individuals immigrating to Australia who are over the age of 40 are responsible for their own health insurance in Australia
    – That those migrating to Australia do not reside (and have no entitlement to live for ten years) in any locales where residential real estate prices have increased by more than 10% per annum in any of the previous three years.

    Instead of some genuine barometers of what is economically good for us as a nation we get fed large dollops of utter bullshit. Bullshit of every conceivable variety – mainly to protect the bullshit of a large menagerie of vested interests……..

    Of course there is the utter bullshit from the Hanson end of the spectrum to the effect that each and every Moslem is somehow a threat because the terrorists du jour are Islamic – without going anywhere near identifying that we have had an armed presence in the parts of the world where genuine refugees come from, generating genuine refugee circumstances, and when did we last ask ourselves about the Saudi regime and what it funds, and why we support it? – and have had for generations. That is also before we get to the factoid that Islamic immigration to Australia is pretty small and that the Islamic community here is roughly 2% of us.

    Then there is the one section of the migrant community our politicians do want to talk about – refugees. People who want to rock up on boats uninvited (and only on boats – if they fly in with a visa and happen to overstay then does anybody ever really look for them?) Who we currently shunt to fucking expensive prison camps in PNG and Nauru. These guys make up less than 2% of the people coming to Australia each year. A certain part of me cant help but wonder if the sheer endurance and desperation of some (not all) of these people is maybe something we want in the national mix.

    Then there is the not inconsiderable bullshit sprayed about regarding 457 visas (or special skills needs visas). They were originally designed to cater for skills that Australia didnt have. Somehow we have arrived at a national consensus of trashing our education sectors (indeed running them as loss leader items for the population Ponzi requirement) to the extent that we don’t look at what we have done to meet demand for whatever skills we are importing – is it so unAustralian to run courses for in demand skills? Could there not be a case for telling anyone importing 457s that they can have one 457 for every Australian they are training to exactly the same level they are importing for? We have a system where nobody needs to justify anything anymore they just need to state they have the demand. And that’s before we get to the medical world where a very nice closed shop fronted by Australia’s most powerful union (the AMA) which accredits training volumes, keeps labour costs just where the closed shop wants them and uses migrant doctors as the release valve on public demand (while hammering them for accreditation/skills recognition costs)

    Then there are the dirty little lurks like those poor domino’s Pizza guys or the 7/11 crowd, or every other petrol station we ever wade into. Almost as though we have attached a system of immigration leeches to ourselves who we allow to control the immigration into Australia through an almost mafia like system – the restaurant workers threatened with deportation if they complain about their pay, the sex workers, the fruit pickers, the crowds dodgily scammed through some form of education visa when they are just here to be exploited by people who only want cheap labour – and know the cheapest and most compliant labour will be from offshore and threatenable with a visa revocation. We, Australia, as a nation, have cultivated this ugliness in our world.

    Of course, as the Domainfax piece alludes fairly clearly – and as the 4 Corners piece tonight will make similarly clear – we import a significant security threat with our lack of questions about some Chinese. On the one hand we import the threat because we openly welcome the beneficiaries of corruption that the Chinese want back, but on the other because we aren’t prepared to stand up and openly state that we have sovereign rights in our nation (same as the Chinese do there) and that anyone with connection to a foreign security service, or undertaking activities which are essentially to the benefit of foreign security services will be booted. Our pusillanimity – from politicians taking up board seats on joint ventures controlled by a foreign government, to politicians who put their hand out for financial support, to academics who front for soft power organisations, and journalists who know but never acknowledge what they know – just welcomes that risk in, as well as the ‘values’ and ‘behaviours’ that go with that.

    But beyond that – our simple refusal to state clearly the ‘why’ and ‘how many per annum’ and ‘over what period’ and ‘where they can live’ of immigration…….. if the Australia is captive to a mindset that says private debt is taken out by responsible adults and doesn’t need worrying about then its counterpart is the mindset that seemingly tells us we bring in migrants and don’t worry about what they do or why they do it – they must by definition almost, be productive….. is cruelling Australia’s economic future: The future of those currently immigrating to Australia, and those who have generations worth of ancestry here. And the vast bulk of those who come to (and want to come to) Australia, are those who want it to work – who want a better future for their kids and want to do something productive and want to contribute. What I am talking about is not anti immigration (I was at an Australian citizenship ceremony with my wife last week and count plenty of migrants as close friends), it is about making immigration work.

    All we have done so far is develop an economy which digs things out of the ground or grows them on top of it using about 5% of the people here (and a relatively unskilled 5% at that) and imported more people to divide that bequest between. If we aren’t developing an economy which uses the other 95% and increases skills being used to generate wealth then surely we have to ask why we would run immigration at high levels.

    What we get from both sides of politics and indeed every player in the political spectrum – with the exception of Sustainable Australia, maybe – is a collection of motherhood statements and exhortations, which cultivate a sense that questioning immigration volumes is somehow racist, and that unquestioned high levels of immigration is only ever a good thing.

    In the 106 years between Federation and 2006 Australian had Net Overseas Migration of more than 150k per annum on only 4 occasions. Since 2006 it has run at more than that every year, and for 4 years it has run at double that.

    It is first and foremost a political problem – a simple lack of preparedness on the part of our politicians to baldly state some facts and address the issues they imply. It is simply weak. Being honest with ourselves, is the first step to being honest with the people we would like to migrate here about what they can do for us and what we can do for them – what we can all do which is in the interests of each other. It isn’t a question about race or values or religions. It isn’t even a question about numbers. It is a question about economic logic and our preparedness to be accountable for ourselves as a nation for what we hand over to future Australians.

  8. Again, Kerin is being loose with the truth. The PC’s latest report clearly showed that migrants are far more likely to settle in urban areas than people born in Australia, thus debunking his claim that “they’re more willing to move to where jobs are”.

    To be fair, I’m not sure that you’ve necessarily debunked that claim. Both his argument (immigrants go where jobs are) and your reply (immigrants mostly settle in cities) may well be true – largely because all the jobs are in the cities! Having said that, I don’t really buy his argument about increasing flexibility all that much; in the big cities I doubt there’s a big problem of a lack of flexibility in the labour market.

    • Throughout the mining boom, the resources states drove job creation. Yet NOM continued to flood Sydney and Melbourne. That’s my point. It’s hard to argue that immigrants are ‘flexible’ when they primarily come to Sydney and Melbourne only.

      I have amended the post to make this point more clearly.

  9. Repeat after me
    Correlation is not Causation!
    Correlation is not Causation!
    Correlation is not Causation!
    There you are, that should do it, write it out a few times if you’re still having problems remembering.

    As for the topic, how exactly would you see Australian society repairing itself if there were no or dramatically reduced immigration?
    If the past is any indicator than it’ll get very ugly when Australians realize that Immigration wasn’t the big bad boogie man that you’re claiming. Our Political capital will have been spent on the wrong thing and that’s the thing about Political capital (that makes it different from Monetary capital), you can’t just import more and you cant spend it twice.

    If reduced Immigration were a fix for anything than I’d be the first screaming for it, but it fixes nothing, maybe we compete a little less viciously on housing for a few months but that won’t last, the gods of RE will adjust their game plan as will the gods of capital. The ponzi game will go on, Australians will demand nothing less, everyone knows that wrt Aussies you can steal their jobs and they’ll get over it, but don’t F with their houses because that’s the true source of Sydney/Melbourne wealth.

    • What’s wrong with lowering immigration back to the historical average – you know, when Australia’s housing and infrastructure could digest the intake?

      The first rule of policy should be not to make things worse. And guess what? Maintaining a turbo-charged immigration program that increases Australia’s population by one million every 2.5 years most certainly does make everything worse and problems harder to fix.

      Rather that lambasting me for daring to advocate a lower immigration intake, how about you explain clearly why the current 200,000 permanent migrant intake is optimal and raises incumbent living standards? C’mon, put up or shut up?

      • BlackFella has a point, but MB are not guilty. The whole Ponzi is not dependent on immigration, that is just one element in a wall-to-wall, rampant “ponzi everything” scheme which sadly dominates politics today. Is there one single policy setting on anything that is not a Ponzi-maximiser?

        Virtually no policy change in isolation, will change the Ponzi on its own, with the possible exception of reforming urban growth so that infrastructure is funded correctly and the free market is allowed to match supply and demand. I believe that the examplar regions in the US south and heartland will prove long term, that numerous “Ponzi” contributing factors need not be harmful at all if they are combined with the right urban growth policy settings. Easy credit, tax incentives, population growth, whatever; it is possible to stimulate real economic activity instead of zero-sum Ponzi asset value inflation.

        • Sure Phil. If we had world class urban planning, then the immigration ponzi wouldn’t be as harmful. But by the same token, if we had lower (sustainable) immigration, the urban planning cartel also wouldn’t be nearly as harmful.

          What’s the likelihood that Australia will magically free-up land-use and planning? I’d say buckleys and none. So given these settings are ‘baked in’, then why persist with hyper immigration? Or alternatively, only run a high immigration program once these other issues have been fixed (rather than making them worse via mass immigration).

          Also, Sydney is land-locked to a significant degree. So even with permissive planning, it would still suffer from land availability issues.

          I take a pragmatic approach to policy. And the easiest and most logical solution is to significantly lower immigration. The first rule of policy should be not to make things worse by never-ending crush-loading of Sydney and Melbourne.

          Finally, why how would a population of 40 million mid-century (current settings) improve living standards more than a population of 33 million (under historical NOM)? I believe it wouldn’t especially under existing settlement patters whereby most migrants come to Sydney and Melbourne.

      • Lets imagine it’s 2050 and Australia remains a first world nation with a first world standard of living.
        What does this society look like?
        Lets assume that the infrastructure China boom faded in the 2020’s and gave way to a Chinese consumerish style society.
        Lets further assume that the fabled land of Chindia was still borne, leaving India largely an unchanged basket case.
        As for Africa, they always had the natural resources to fuel their own fire, so their fate plays no role in our future.
        What does this post Mining Australia look like?
        What do we sell to the rest of the world?
        What do we receive in return?

        If everything goes perfectly than Australia will have made the transition from a narrowly focused mining exporter to diverse product/service based export economy.
        https://www.macrobusiness.com.au/2017/04/australia-records-big-trade-surplus-february/australian-exports-by-category/

        If we do this analysis in 2015 dollars than it’s clear that our export services (and diversified product exports) must ramp to around $300B(2015 dollars) in the space of 35 years.
        That’s the task we have before us if we wish to retain our standard of living.
        OK lets just assume that the largest of these ventures is $1B pa revenue with median income of $50M (all in 2015 dollars).
        If this is the case than how many distinctly separate ventures are required, do the math and you’ll see that the numbers quickly go into the thousands if not tens of thousands. That’s tens of thousands of Aussie’s scouring the world for opportunities that wouldn’t even hit the radar of big companies like BHP, Rio or even our own SuperFunds. A real grass roots bottom-up led recovery.

        My picture of a successful 2050 Australia requires a wholesale transformation of the population. That Aussie traveler needs to transformed from the net liability he/she represented in 2015 into the net asset of 2050.
        We need to become a nation that’s hungry and looking globally for any and all opportunities, we need to relearn what it means to hustle and capitalize on whatever opportunity lands on our plate (no F that anything that even lands near our plate)
        Now with this in mind what does this 2050 population need to look like? what demographic breakdown will deliver my dream? If you can still see your reflection in this economic mirror, then you really do need new glasses.

      • drsmithyMEMBER

        what demographic breakdown will deliver my dream?

        But the real question is “how many people does it need”.

        50,000 small businesses each with fifty employees is only 2.5m people.

      • 50,000 small businesses each with fifty employees is only 2.5m people.
        Exactly, it’s a strategy that we could in theory execute with our current Aussie population except for the fact that we’re not moving in this direction. Increased Immigration is no guarantee that we’ll start with this transformation however we will be at least better hooked into this continued global growth and able to identify these opportunities.
        The sorts of opportunities that I’m referring to are more likely to develop through an extended family relationship, than as the result of any decisions made in any corporate board rooms. It’s this need for 10000 separate growth strategies that makes immigration an essential element of the final equation.
        Think about the Chinese baby food problem, it was solved for Chinese parents (living in China) by friends and relatives in Australia buying baby food at our local supermarkets. That’s not one individual but thousands of different people all doing the same thing to support their friends and family in China There is no logical reason that the big dairy corporations shouldn’t own this market, however they in effect spat in the Chinese consumers face and this is their reward. This transformation from a market owned by the large Dairy corporations to a market dominated by a diverse base of local exporters has the added benefit of dramatically increasing the Total value of the export market for baby food, it changes this market from a single sourced commodity accepting commodity margins (say 20% to 30%) into a diverse market earning gross margins of 200% or higher. the unit size of the market can remain unchanged but it’s value as an Aussie Export increases ten fold.
        That’s the Australia that we need to build, that’s the Australia I’d love to call home.

      • Lots of meaningless platitudes, navel gazing and motherhood statements there, no actual arguments, evidence or data.
        There are none so blind as those that do not wish to see!
        What “data” do you want to see?
        I can tell you that you probably won’t find it in any ABS publication because they’re far to focused on today’s big picture to waste the resources understanding the markets that I’m talking about.
        This transformation also wont happen if the Ponzi game continues because only a moron would focus on such a difficult task when there are such easy takings right on one’s own doorstep.

    • hareebaMEMBER

      Blackfella.

      Forget the impacts Immigration has on real estate for a moment.

      Are you happy with packed roads, schools, beaches and hospitals? What about the impact on the environment? You sound a pro growth stooge to me.

      We seemed to survive quite well before the now immigration levels. Your comments are rubbish.

      • Hey don’t get me wrong, I’d love nothing more than to wind the clock back 200 odd years and have my great great grand parents fight a battle so violent and so viscous that Captain Cook would just keep on sailing, trouble is the future doesn’t work that way.
        The Sydney that I knew as a youth is a utopia that’s long dead. It’s naive to believe that we can integrate into Asia and not absorb some of the excess Asian population. People is what they have the most of, so it’s what they’ll be most interested in exporting. These people may come to us with $10M but come they will, thing is we get to select who we accept and that’s where we’re doing a really bad job at the moment. The immigrants that we’re accepting are adding little or no value, many of the foreign students are studying useless courses and we’re granting them residence for the price of a Uni degree in basket weaving , who’s fault is that?

  10. KatharineMEMBER

    Kerin claims that Australia’s rate of population growth ranks 86th on a list for the developed world.
    He does not give a source for his data. The United Nations lists 36 developed countries. In the years 2010 to 2015 Australia had the second fastest rate of annual population growth in this group (1.57%). It was exceeded only by the tiny Duchy of Luxembourg (2.21%), with a population of just over 500,000, 46% of whom were foreigners, mostly EU nationals.
    Australia is growing rather faster than Kazakhstan, Uzbekistan, Venezuela and a range of other countries whose economic models we probably do not wish to emulate.

  11. ‘Golden Goose’ – current rate of immigration is more like an Albatross around the neck of the economy…

  12. hareebaMEMBER

    Paging Kipron.

    ‘ What’s the probs? … Just build more infrastructure. I am paying off me property … can’t have it devaluing. Keep those plane loads coming in. The economy will crash otherwise’.

    As Skip says …. chortle.

    • “Paging Kipron.

      ‘ What’s the probs? … Just build more infrastructure. I am paying off me property … ”

      And just think Hareeba, with all the time you spend complaining about immigrants, you could have been paying off a property too.

      • hareebaMEMBER

        Been there done that

        Standard empty lame reply from you. What about the issue Einstein?

  13. DominicMEMBER

    It’s very simple: an immigration policy (outside of humanitarian in-take) is not compatible with a welfare state.