You can’t hate the bubble and love immigration, Mr Burgess

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I know Rob Burgess is a Lefty. He’s told me so. And today he offers some crocodile tears for Australia’s most persecuted class, its youth:

One of the common questions asked by 30- to 40-year-olds is ‘should I borrow a huge sum of money to buy a house?’.

The answer depends to an extent on the buyer and the area, but all borrowers face growing risks – especially upward pressure on interest rates from abroad and falling dwelling prices in some areas.

Loose lending has helped push house prices beyond the reach of ‘Generation Rent’, for whom home ownership is now an impossible dream.

But on the flip-side we now have what you might call ‘Generation Spent’ – those who borrowed too much and whose after-mortgage spending power is becoming exhausted.

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Yet, recently Burgess also wrote this:

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There is much to learn from the rise and fall of populist leaders overseas, because similar trends are evident here.

As Australia struggles to return to a decent level of economic growth, and to escape an extended period of wage stagnation, several persistent myths threaten to apply the brake at exactly the wrong time.

The first is the wildly exaggerated claim that Australia is “full”. Former entrepreneur Dick Smith makes the claim fairly regularly, and did so again this week in The Australian newspaper.

Mr Smith’s call for immigration to be more than halved is echoed by the likes of Pauline Hanson’s One Nation party and former Liberal, now independent Senator Cory Bernardi.

Yet none of these campaigners discuss why immigration is so high at present – net overseas migration is heavily swollen with foreign students, who obtain qualifications here and then often seek to settle in Australia permanently.

We are going through an education boom that, depending on commodity prices, occasionally pips iron ore as our biggest single export. And it is a boom that invites, trains, and then settles smart, motivated, new Australians.

Net overseas migration should fluctuate up and down a bit depending on conditions, but to kill this golden goose during a period of transition away from the previous mining investment boom would be damaging indeed.

The only thing wildly exaggerated here is Rob Burgess’ lies about mass immigration. Students are not migrants. They are temporary residents and they leave. The permanent migrant intake is set by the Federal Government, currently just above 200k. It is the only long-term driver of the mass immigration contribution to population growth.

Sure, some of those began as students. But if the permanent migrant intake were cut to the historical norm of 70k it will do virtually nothing to dent the student boom which is largely driven by cost competitiveness and the rise of Chinese demand. In fact, given house prices will fall and so will both interest rates and the dollar, the education export boom will almost certainly take another leg up. Along with all of those other long-neglected tradables that are the ultimate way out of the bubble economy.

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Yet “Generation Rent” and “Spent” have been, and are still, being priced out of houses in part by mass immigration, with which our housing supply system manifestly cannot cope.

It’s all very well to pretend to care about downtrodden classes but in the end eggs must be broken to prevent it getting worse. That’s why it’s called class warfare.

You can’t hate the bubble and love immigration at the same time. Especially if you’re a Lefty. Not if you’re fair dinkum.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.