Paddy Manning embarrasses self in attack on MB

By Leith van Onselen

Paddy Manning is the latest to attempt to discredit MB, and me in particular, on the immigration debate. Writing in The Monthly, Manning has penned the following drivel:

Melbourne economist Leith van Onselen, from MacroBusiness and a member of the Sustainable Australia party, this morning told 2GB’s Michael McLaren that Abbott’s comments were “absolutely fantastic” and “a great start”. In furious agreement the pair blamed immigrants for overcrowding schools and hospitals, traffic congestion and housing affordability, and generally turning our “free-range” cities into “battery farms with these tiny dreadful apartments”. Van Onselen said Abbott was “absolutely right” to link immigration to wages growth. They blamed a growth lobby of developers and retailers, and a federal government chasing a higher GDP number, and also the Migrant Council.

As it happens, economist Tom Westland unpicked van Onselen’s figures in The Guardian last year:

The academic literature supports the idea that immigration is not likely to make non-immigrants any poorer. Studies suggest that, on average, immigration has little to no impact on wages … Our cities feel crowded and our natural resources are under pressure. But this is almost entirely Australia’s own fault. We keep on spending billions of public and private dollars on white elephants like the Adelaide-Darwin rail line because we’re too lazy to do the analysis required to allocate infrastructure money efficiently, or because politicians ignore analysis when it’s done…

Van Onselen wants a plebiscite on Australia’s population…

The Monthly is owned by Schwartz Media. Schwartz Media also runs the Real Estate Conversation, and owner Morry Schwartz is a property developer. Go figure…

As for Tom Weslandlake’s comments in the article, these were comprehensively debunked by MB (here and here). Go and read it for yourself if you care to. At the time, MB asked The Guardian for a right of reply, which it refused – presumably because it was scared of the truth. Mr Weslandlake himself disappeared in a rain of Twitter tears.

On the specific issue of immigration and wages growth, the Productivity Commission’s 2006 and 2016 modelling showed that incumbent workers’ wages are reduced from immigration (read here).

Whereas the 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.

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'”.

On the specific issue of housing and infrastructure, the Productivity Commission (PC) is clear and unwavering that mass immigration causes strains. Consider these extracts from the PC’s Migrant Intake Australia report:

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.

…there will be additional costs for the community where environmental services that are currently ‘free’ have to be replaced with technological solutions…

…where assets are close to capacity, congestion imposes costs on all users. A larger population inevitably requires more investment in infrastructure, and who pays for this will depend on how this investment is funded (by users or by taxpayers). Physical constraints in major cities make the costs of expanding infrastructure more expensive, so even if a user-pays model is adopted, a higher population is very likely to impose a higher cost of living for people already residing in these major cities.

This follows the PC’s warnings in 2013 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:

The likely population growth will place pressure on Australian cities. All of Australia’s major cities are projected to grow substantially… In response to the significant increase in the size of Australian cities, significant investment in transport and other infrastructure is likely to be required… Total private and public investment requirements over this 50 year period are estimated to be more than 5 times the cumulative investment made over the last half century…

Similarly, in its latest Shifting the Dial: 5 year productivity review, the PC explicitly noted that infrastructure costs will inevitably balloon due to our cities’ rapidly growing populations:

Growing populations will place pressure on already strained transport systems… Yet available choices for new investments are constrained by the increasingly limited availability of unutilised land. Costs of new transport structures have risen accordingly, with new developments (for example WestConnex) requiring land reclamation, costly compensation arrangements, or otherwise more expensive alternatives (such as tunnels).

Obviously, there is a clear link between mass immigration (population growth) and strains on housing and infrastructure. Why is Paddy Manning even debating this point?

Next, in stating that I “blamed immigrants”, Manning insinuates that I am racist and xenophobic. This couldn’t be further from the truth. MB has for years explicitly supported immigration, but at more sustainable levels. Heck, we explicitly stated this upfront in MB’s submission to the federal government’s Migration Program review.

Finally, I wholeheartedly stand by my call for a plebiscite on Australia’s future population. Let the people decide how ‘big’ Australia becomes. I’m not alone here: the PC also called for more democracy in Australia’s immigration policy in its Migrant Intake Australia report:

…decisions on the migrant intake should be part of a transparent population policy based on well – informed engagement with the Australian community so that the policy reflects the preferences of the broader community as well as businesses.

…businesses who benefit from the increased supply of labour and, with this, demand for their goods and services, and [the incentives of] members of the community, as reflected in the large number of submissions raising concerns about house prices, congestion, and other environmental impacts. Even if all of the concerns raised are not proven, these views do need to be taken into account in setting the migrant intake…

Australia’s system of parliamentary democracy has an in-built predisposition towards ‘hearing’ from certain stakeholders (who typically have a vested interest and are well organised). In contrast, members of parliament are less likely to ‘hear’ from affected constituents for whom the effect of a policy change is individually small, but is large when added up over many constituents…

What’s wrong Paddy: are you afraid of giving the Australian people their say?

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