Abbott canes Morrison, wedges entire front bench

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Tony Abbott has slammed Scott Morrison just now:


Meanwhile, more immigration defense at Domainfax:

Acting Prime Minister Mathias Cormann, Trade Minister Steve Ciobo and Home Affairs Minister Peter Dutton have now dismissed the position championed by their former leader, adding weight to comments made by Treasurer Scott Morrison earlier in the week.

“Tony Abbott is wrong,” Senator Cormann said on Thursday morning.

“To criticise the experts and say that somebody who is not an expert knows better is not the right approach.”

Mr Ciobo said it was important to have open discussions about issues like immigration but he “could not disagree more strongly” with Mr Abbott.

“I think it’s a great shame that we often see immigration and, in particular, immigrants having the finger of blame pointed at them on issues like, for example, escalating house prices or depressed wages growth. I think that that’s lazy, I think it’s highly inaccurate,” he told ABC radio.

“The fact that arguments are made gives me an opportunity to rebut them. For example, the suggestion that immigrants play a role in pushing up house prices a palpably absurd statement to make.”

Mr Ciobo pointed to the fact that Sydney house prices were not representative of the national market, with prices much more affordable and even falling in other parts of the country.

The further into this debate we get, the dumber the responses become. On house prices, Ciobo is hardly worth responding to given the immigration flows are only into Melbourne and Sydney. On the specific issue of wages growth, the Productivity Commission’s 2006 and 2016 modelling showed that incumbent workers’ wages are reduced from immigration (read here).

Academic literature is mixed. Sure, standard economic theory claims that net inward migration has minimal long-term impact on wages. That is, when the quantity of labour increases, its price (wages) falls. This will supposedly increase profits, eventually leading to more investment, increased demand for labour, and a reversal of the initial fall in wages. Immigration, so the theory goes, will enable the larger domestic population to enjoy the same incomes as the smaller population did before.

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However, a recent study by Cambridge University economist, Robert Rowthorn, debunked this argument. The so-called ‘temporary’ effects of displacing incumbent workers and lower wages can last for up to ten years. And if there is a continuing influx of migrants – as is the case in Australia – rather than a one-off increase in the size of the labour force, demand for labour will constantly lag behind growth in supply.

In other words, if the Australian Government was to stem the inflow of foreign workers, then workers’ bargaining power would increase, as will wages growth. It is basic economics.

As noted in April last year by The Australia Institute’s chief economist, Richard Denniss, the very purpose of foreign worker visas is to “suppress wage growth by allowing employers to recruit from a global pool of labour to compete with Australian workers”. In a normal functioning labour market, “when demand for workers rises, employers would need to bid against each other for the available scarce talent”. But this mechanism has been bypassed by enabling employers to recruit labour globally. “It is only in recent years that the wage rises that accompany the normal functioning of the labour market have been rebranded as a ‘skills shortage’”.

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What Cormann means to say is that Abbott should not challenge his (Cormann’s) chosen experts.

Fact is, whether we’re debating the Baptists or the Bootleggers, neither appears to have much defense to mount in favour of mass immigration. It’s all supposition to support interests.

Now thoroughly wedged by Mr Abbott and looking pretty stupid.

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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.