The Economist does Big Australia

Via The Economist:

Mr [Dick] Smith is also right about the decline in living standards, albeit only recently. Wage growth has been dragging along at its lowest rate in almost 20 years, and dipped below inflation earlier this year, meaning that the typical worker is losing purchasing power. Although the unemployment rate, at 5.6%, is low by the standards of recent decades, underemployment is close to a record.

Yet, to the frustration of alarmists like Mr Smith, relatively few Australians seem to think the way to boost their incomes is to stem the influx of immigrants. In 2015 Gallup, a pollster, found that Australia was the only big Western country where more people thought immigration should rise (30%) than thought it should fall (25%).

…It is true that immigration appears to have raised unemployment and lowered wages in certain industries. Bob Birrell of the Australian Population Research Institute notes that Australia’s points-based system, which is designed to attract workers with skills that are in short supply, has brought a deluge of accountants and IT professionals. Over half of foreign students study business and commerce because they believe that will give them access to high-paying jobs, he says, but they are often left on “the fringes of the labour market because it’s difficult to compete with locals”. Overall, however, Australia’s Productivity Commission finds no evidence that migrants suppress wages or displace locals from jobs. They help raise GDP per person, not lower it, in part by making Australia’s population more youthful, thus offsetting the ageing of its baby boomers.

Hmm, a bit more research was needed on that! Here’s your raised GDP per person compared with the migration surge that began in 2003:

And it’s worth once again highlighting that economists at MIT recently found that there is absolutely no relationship between population ageing and economic decline. To the contrary, population ageing seems to have been associated with improvements in GDP per capita, thanks to increased automation:

If anything, countries experiencing more rapid aging have grown more in recent decades… we show that since the early 1990s or 2000s, the periods commonly viewed as the beginning of the adverse effects of aging in much of the advanced world, there is no negative association between aging and lower GDP per capita… on the contrary, the relationship is significantly positive in many specifications.

Moreover, the PC modeling did find wages were lower than otherwise in its study, and it did not look at immigration in today’s circumstances of over-supply which is definitely hurting wages more than usual.

The Economist goes on:

But the surge in immigration has caused problems, most obviously in terms of planning. Theoretically, there ought to be plenty of space for the 230,000-odd yearly arrivals, since Australia is one of world’s least densely populated countries. But the vast majority of its people, and an even greater share of its immigrants, cluster in a few cities near the coast. Despite substantial investment, urban infrastructure is struggling to keep pace. Melbourne and Sydney, in particular, are pulling at the seams. Commuters are subjected to snarling traffic, the costs of which are predicted to double by 2030. The number of passengers on Sydney’s commuter trains, meanwhile, grew by 11% in the year to July.

Immigration has also stoked house prices. In Sydney the average home costs A$1.2m, up almost 20% in a year. By one count, the city is the world’s second-most expensive relative to incomes. The once-standard house on a quarter-acre lot is beyond the means of most. Those who do buy a home are heavily indebted: at 134%, the ratio of household debt to GDP is also one of the highest in the world. A recent analysis found that buyers in Sydney would need to make A$190,000 a year—more than triple the average salary—to repay their mortgages comfortably.

You listening, Chris Kohler?