“Clearly Australia is now running 26 years without a recession, but population growth has been such an important part of that,” said bond fund manager Charlie Jamieson of Jamieson Coote Bonds. “A lot of current development is predicated on that continuing, particularly in the east.
“The problem Australia has got is because it’s enjoyed such healthy population growth, we’ve got weaker GDP growth on a per capita basis than Japan and obviously much lower than most European nations and the US. It certainly would be much easier to lead us to a recession in future.”
…If Mr Dutton is successful in a subsequent challenge, “immigration is the one that would be likely to have the single biggest effect on the economy if the intake were to drop,” CBA’s Gareth Aird said of future policy twists.
Political turmoil “certainly doesn’t make you want to buy the Australian dollar,” said Greg Gibbs, US-based portfolio manager at Amplifying Global FX Capital.
Headline growth will fall initially, yes. But as it does so interest rates will also be cut and the Australian dollar plunge. As capital joins wages in the great Aussie deflation via the falling housing market, Australian competitiveness will soar.
In short, we’d see an accelerated post-mining boom structural adjustment that would swing growth drivers away from urbanisation and towards tradeables. You can’t fatten up the pig on market day so it would take time for the latter to mobilise and take off but boom the sector most certainly will, as it did across the Millennium.
As the dollar crashes deep into the 50s the winners would be education (which will gain more than is lost on price versus citizenship) and tourism, manufacturing, agriculture, mining and gas plus masses of import competers and a billion other things that you can’t predict.
There’d still be no inflation because consumption would be weak and volumes cut so importers would wear it in margins.
It’s the adjustment that’s coming one way or another. We can do it now under our own control or at the end of the cycle when markets crash house prices.
So, would Dutton immigration cuts crash the economy? Only for the losers like the AFR. After a period of adjustment we’d see entirely new and much more sustainable growth and income drivers emerge.
The bottom line is this: headline GDP may be lower but your standard of living will be higher.
