Alan Kohler: Australia is now just a people farming economy

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By Leith van Onselen

Alan Kohler penned a timely article in The Australian over the weekend arguing that the Australian economy has morphed from being a resources economy to a “human beings” one, whereby the growth is being driven by mass immigration rather than productivity improvements, and individual living standards are sliding:

…two-thirds of last year’s economic growth came from population and most of that from immigration.

Australia is moving from being a resources economy to a “human beings” one. Domestic demand is growing strongly as a result of both population growth and tourism (which added 1 per cent to growth in the December quarter). Both net exports and real national income per capita fell.

So Australia’s actual national economic strategy, as opposed to the pretend one, is to simply add numbers — not to encourage jobs and growth through tax cuts — and it has been since 2005, when John Howard doubled average immigration from 100,000 per year to 200,000.

Subsequent governments have stuck with the program and as a result, population growth has averaged 350,000 per year for a decade, most of it clustered in the two big cities.

Absurdly, despite Australia’s sparsity overall, the place is now getting overcrowded where it counts…

But the problem — arguably the main economic problem for this country — is that immigration is a federal responsibility and housing the arrivals is up to the states.

The federal government gets the bouquets from the economic statistics while the state governments get the brickbats from congestion. And the whole country has to deal with the problem of housing affordability and excessive household debt…

Anyway the evidence is clear: Australia needs a national strategy combining immigration and housing or else cut immigration back to where it was pre-2005 and accept even lower GDP growth.

This is the ‘rat wheel’ economy MB has been describing for years: an economy where the economic pie has grown due to extreme population growth (immigration), but where everyone’s slice of that growing pie has been shrinking, and living standards are falling once wider impacts on livability are taken into account (e.g. worsening traffic congestion, environmental degradation, and smaller more expensive housing):

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Clearly, Australians have become fed up with this growth model, with a Sky News poll held over the weekend showing that an overwhelming majority of respondents (72%) want Australia’s immigration intake cut:

This follows October’s survey by the Australian Population Research Institute, which showed that nearly three quarters of Australian voters believe the nation does not need more people:

With more than half wanting Australia’s immigration intake reduced:

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Because population growth was putting ‘a lot of pressure’ on hospitals, roads, affordable housing and jobs:

Rather than letting the one percenters decide Australia’s immigration intake, let’s have a population plebiscite at the next election so that we can let the Australian people determine how ‘big’ and crowded they want the nation (and our cities) to become.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.