Abbott rips into front bench

Tony Abbott maintains the immigration rage today at The Australian:

You’d think a government that’s lost the past 27 Newspolls might be curious about how it could lift its game. You’d think a government that has too few ­policy differences with Labor might consider a change of ­emphasis that would make clearer the choice of who’s really on the voters’ side. But no, ministers have gone out of their way to attack a colleague who knows more about winning elections than anyone in the parliament.

Acting Prime Minister Mathias Cormann said I was wrong to criticise the experts. Actually, experts provide advice but it’s government’s job to make decisions. If government were required to take public-service advice, there’d be no point bothering with elections. One of this government’s failings is that it too often takes advice from the “experts” who got us into difficulties in the first place.

Trade Minister Steve Ciobo said my argument was “lazy” and “inaccurate” because migrants have brought prosperity to Australia. No one denies this, Steve, but does that mean that immigration must always add a city the size of Adelaide to our population every five years?

Then there was Scott Morrison, who claimed reducing immigration had never been discussed while I was prime minister. This is false. I vehemently disagreed with the Treasury line that we couldn’t cut immigration because that would harm the budget — ­although we didn’t adjust the official target because immigration was then trending down, by almost 50,000, since Labor’s last full year.

Meanwhile, “Racism Rob” rejoins the debate at the New Daily:

In fact, the figures Mr Abbott has started the debate with are out of date. He is quoting the Bureau of Statistics figure for the year to June 2016.

However, director of migration statistics at the ABS, Myles Burleigh, directed The New Daily to the most recent figure, to June 2017, which was 245,400.

That both helps and hurts Mr Abbott’s argument.

On the one hand, he can claim that net migration is booming back towards the peak level seen in 2012-13 which was just short of 300,000.

On the other hand, the economic benefits foregone from slashing migration from 245,400 to 110,000 would be even larger – that is, a bigger subtraction from GDP, GDP per capita and government tax revenues.

…There is also some confusion around the types of visas people are here on, because many people switch between visa types while in Australia, according to ANU demographer Professor James Raymer.

Nonetheless, breakdown of arrivals and departures in various visa categories are published by both DIBP and the ABS – and they are similar enough to give a decent idea of who’s coming here.

The largest category by far is student visas. That goes a long way to explaining Mr Morrison’s position because the earnings from ‘education exports’ are now so large that they sometimes overtake iron ore export earnings.

Another key category is the temporary skilled visa, or 457 visa. ABS figures show at the peak of the mining investment boom those visas peaked at 126,348 but is estimated to have fallen to 14,654 this year due to a Coaltion government crackdown on their over-use. (DIBP estimates that figure at 21,800).

The key to understanding the immigration debate is much more about understanding the mix of migrants, and balancing the economic gains of a more skilled workforce, or those huge volumes of university fees, with any pressure they might create on housing, employment, healthcare resources and so on.

Where does that balance lie? Probably around about the figure Mr Abbott has used to start this debate – 190,000 or so – but certainly not the 110,000 he wants to cut it to.

The updated figure of 245,400 is a huge jump in one year, so Mr Morrison needs to pay more attention to concerns in the community that infrastructure is struggling to keep up with population growth, especially in Melbourne and Sydney.

That is a failing of state and federal governments. As I wrote a year ago “in the short-term immigration levels will need to be cut. But in the longer-term we need to stop blaming willing, hard-working, would-be migrants for the policy failings of Canberra”.

A sensible ‘cut’ is not a ‘slash’ – and thankfully the Turnbull government frontbench has had the good sense to slap down the Abbott proposal.

Mr Morrison is right that high-ish levels of migration are a net positive for Australia – not only in gross domestic product, but in per capita terms.

That’s due to the import of skills which help boost productivity, but also from those huge education export revenues.

As the table above shows, there really are no easy immigration cuts that would not either rile voters or harm the economy.

OK, first, does this look like it’s adding to GDP per capita to you?

Second, the impacts on the Federal Budget are miniscule versus the those on the state Budgets. Morrison’s figure is a paltry roughly one billion per year. Meanwhile, to cope with ever expanding service delivery, state Budgets are currently spending roughly $100bn on investment, much of it debt funded. S&P warned on this just a week ago.

Third, focusing on visas over migration is where the confusion lies. It is the permanent migrant intake that sets the base for population growth. This is the key long-term measure that pressures house prices, infrastructure and wages (though the impact of the influx if students on wages is also a worthwhile question). Temporaries ebb and flow around all sorts of factors including the business cycle, AUD, policy, fashion etc.

Fourth, rather than the assertion of a journalist, can we have some evidence that importing skills boosts productivity? Yes, specialised skills will do so but if the political economy cannot cope with the influx of people then productivity more broadly will fall. See Infrastructure Australia today:

Infrastructure Australia, the nation’s independent infrastructure body, on Friday released landmark report proposing three alternative visions of Sydney in 2046, when the population is projected to hit 7.4 million.

The modelling provides a side-by-side comparison of managing Sydney’s rapid growth, either by maintaining the urban sprawl to the city’s fringes, by heavily densifying the inner city suburbs with multi-storey apartment blocks, or by a rebalancing growth across the city in medium density housing.

Under each 30-year scenario, Sydney’s infrastructure will be placed under significant pressure, and the average number of hours spent on congested roads during the morning peak will more than double.

Demand for schools will increase by about 70 per cent, while access to hospitals declines under each model. Public parks and open spaces will also become increasingly crowded.

Fifth, an economy is not something frozen in time. If immigration is cut there will be an adjustment to other growth drivers:

• house prices, interest rates and the AUD will fall further (or rise less) than otherwise (this will also help limit debt build-up);
• as competitiveness rises, tradables will be stronger than otherwise supporting among other things education exports;
• productivity will rise as bottle-necked infrastructure is freed up, contributing more to income gains, and wages will be stronger as well;
• in short, the pain of the post-mining boom adjustment will be more fairly spread across capital not just wages.

Finally, let’s recall that we are debating the amount of immigration that is appropriate not whether it is at all. It can be happily done without constant reference to the colour of people’s skin. That Australia is a migrant nation is not in question. This debate is about whether or not we want to crush the living standards of those already here to benefit the few and the far flung.