Peter McDonald vs Peter McDonald on mass immigration


By Leith van Onselen

Vocal mass immigration supporter, Professor Peter McDonald, gave a presentation earlier this week at Melbourne University on immigration/population policy, whereby he argued that a net immigration intake of around 200,000 people a year is required to offset an ageing population and maximise per capita GDP. Below are the key charts that McDonald displayed to support his conclusion, which is based on modelling he conducted with Jeremy Temple for the Department of Immigration and Citizenship in 2010:

As you can see above, Peter McDonald claims that Australia’s GDP per capita would be 12% higher in 2053 under current mass immigration settings versus zero net overseas migration, which is “due only to the impact of migration on age structure” (i.e. more workers relative to non-workers).

Of course, anybody with a sliver of common sense knows that such a demographic dividend can only be temporary, since migrants also grow old. Therefore, they too will add to the pool of elderly Australians further into the future (i.e. after 2053), requiring an ever larger intake of migrants to ameliorate population ageing and an ever larger population – classic ponzi demography.


But don’t take my word for it. The argument was also made by Peter McDonald who co-authored a parliamentary research paper in 1999 (above) which concluded that it is “demographic nonsense to believe that immigration can help to keep our population young”, claimed that “levels of annual net migration above 80 000 become increasingly ineffective and inefficient in the retardation of ageing”, while also recommending “a population of 24-25 million within 50 years”:

There is no question that immigration, at least the first 80 000 immigrants, provides a worthwhile reduction in the extent of ageing of the population. However, immigration cannot ‘solve our ageing problem’. Substantial ageing of the Australian population over the coming decades is absolutely inevitable. To illustrate the lack of power that immigration has in relation to our age structure, we investigate the levels of immigration that would be required to maintain the proportion of the population aged 65 and over at its present level of 12.2 per cent. In doing this, we maintain the fertility and mortality assumptions of the standard but allow annual net migration to change.

To achieve our aim, enormous numbers of immigrants would be required, starting in 1998 at 200 000 per annum, rising to 4 million per annum by 2048 and to 30 million per annum by 2098 (Table 6). By the end of next century with these levels of immigration, our population would have reached almost one billion… The problem is that immigrants, like the rest of the population, get older and as they do, to keep the population young, we would need an increasingly higher number of immigrants…

It is demographic nonsense to believe that immigration can help to keep our population young. No reasonable population policy can keep our population young…

Levels of annual net migration above 80 000 become increasingly ineffective and inefficient in the retardation of ageing. Those who wish to argue for a higher level of immigration must base their argument on the benefits of a larger population, not upon the illusory ‘younging power’ of high immigration…

There is an upper limit to annual net migration. We argue that there were difficulties in the late 1980s when net migration rose for just two years to over 150,000 per annum. While it is not possible to be prescriptive, a sustained net migration level of 120 000 per annum is at the high end of what Australia seems to be able to manage.


Fast forward to 2018, and Australia’s population has already breached the “24-25 million” limit 31 years early courtesy of a mass immigration program that is around 2.5 times as large as young Peter McDonald’s recommended level.

It’s worth noting that the Productivity Commission also fully endorses young Peter McDonald’s claim that it is “demographic nonsense to believe that immigration can help to keep our population young”, noting the following over the past 13 years:

  • PC (2005): Despite popular thinking to the contrary, immigration policy is also not a feasible countermeasure [to an ageing population]. It affects population numbers more than the age structure”.
  • PC (2010): “Realistic changes in migration levels also make little difference to the age structure of the population in the future, with any effect being temporary“…
  • PC (2011): “…substantial increases in the level of net overseas migration would have only modest effects on population ageing and the impacts would be temporary, since immigrants themselves age… It follows that, rather than seeking to mitigate the ageing of the population, policy should seek to influence the potential economic and other impacts”…
  • PC (2016): “[Immigration] delays rather than eliminates population ageing. In the long term, underlying trends in life expectancy mean that permanent immigrants (as they age) will themselves add to the proportion of the population aged 65 and over”.

In short, trying to overcome an ageing population through higher immigration is a Ponzi scheme, since as stated by young Peter McDonald, it requires “an increasingly higher number of immigrants”. So why has old Peter McDonald ignored this truth?

It’s also worth noting that McDonald’s and Temple’s 2010 model only looked at the impact of immigration on per capita GDP, while ignoring all other pertinent issues:

At the same time, increases to migration add constantly to the population and this increases the burdens associated with the provisioning and servicing of a growing population. This gives rise to the question of balance. At what point do the disadvantages of increased population outweigh the advantages to the economy of increases in immigration? This is a very large question and is beyond the scope of this report. Instead, this report examines one component of this question. Is there a point where further increases in immigration lead to substantially lower marginal increases in the growth of GDP per capita? (p. 19, emphasis added).


Anyone worth their salt knows that per capita GDP is a very poor measure of wellbeing, since it ignores vital issues like the degradation of the environment, the depreciation of natural resources, worsening inequality, and declines in individuals’ quality of life (e.g. traffic congestion and having to live in smaller and more expensive housing).

In this regard, the Productivity Commission is blunt, noting that “GDP per person is a weak measure of the overall wellbeing” in its 2016 Migrant Intake Australia report:

While the economywide modelling suggests that the Australian economy will benefit from immigration in terms of higher output per person, GDP per person is a weak measure of the overall wellbeing of the Australian community and does not capture how gains would be distributed among the community. Whether a particular rate of immigration will deliver an overall benefit to the existing Australian community will crucially depend on the distribution of the gains and the interrelated social and environmental impacts.


Interestingly, the final paragraph of McDonald’s and Temple’s 2010 reported concluded with the following warning that if infrastructure doesn’t keep pace with population growth, then both productivity and living standards will suffer:

While this report argues that immigrants will be important to the construction of productive infrastructure in Australia, if increased immigration proceeds without investment in new infrastructure, especially urban infrastructure, the result could be reductions in productivity through increased congestion and inefficiency. Thus, a plan relating to Australia’s future levels of immigration must be coordinated with policy for urban infrastructure especially housing, transport, water and appropriate energy supply. With constant fertility and net migration at 180,000 per annum, Australia’s population would rise to 35.9 million by 2050. This is a large increase and most of the additional population would be settled in the existing cities all of which are already under strain from infrastructure shortages. (p. 45)

Given that Australia’s infrastructure has unambiguously failed to keep pace with mass immigration, and that traffic congestion (among other liveability indicators) has unambiguously worsened, surely this renders McDonald’s claims about the benefits of mass immigration null and void?


Moreover, how does Peter McDonald square his purported economic benefits of mass immigration against Infrastructure Australia’s projections of worsening traffic congestion and reduced access to jobs, schools, hospitals and green space as Sydney’s and Melbourne’s economic and social infrastructure fails to keep pace with an expected population of 7.4 million and 7.3 million people by 2046 (see below tables)?


Clearly, young Peter McDonald beats old Peter McDonald hands down when it comes to assessing the merits of mass immigration.

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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.