Federal government’s mass immigration program destroys state finances

By Leith van Onselen

In 2018, then Treasurer Scott Morrison made headlines when he claimed Tony Abbott’s proposal to cut Australia’s permanent migrant intake by 80,000 to 110,000 would cost the Federal Budget “$4 billion to $5 billion over the next four years”, arguing “the economy (would not be) growing at the same level and people who come as skilled migrants pay taxes, make a net contribution to the economy”.

It is unambiguously true that immigration provides net benefits to the Federal Budget. The federal government collects more than 80% of Australia’s tax revenue, and therefore collects the lion’s share of the financial benefits that come with immigration, such as increased personal and company taxes.

However, a holistic analysis of financial impacts needs to also take into consideration the significant negative impacts on:

  1. State Budgets, which carry the cost of infrastructure and services to support population growth (think roads, public transport, schools and hospitals); and
  2. Households, who have to pay more as new expensive infrastructure projects are built in response to population growth (e.g. desalination plants, toll road tunnels, etc), and pay more as states sell-off public assets to private monopolies to raise funds for new infrastructure.

Regarding State Budgets, the Grattan Institute in 2014 showed that “unprecedented infrastructure spending by states and territories” since the escalation of population growth from 2004 is “largely responsible for a $106 billion decline in their finances since 2006”, and that “after a threefold increase in capital spending over the last 10 years, states are paying 3 per cent more of their revenues in interest and depreciation”.

Separately, Grattan executive director, John Daley, noted that “state governments were struggling to deal with rapid population growth in their major cities and the quality of life of residents – represented by the rapid growth in house prices in recent decades – was suffering”.

To date, the states have ‘managed’ these costs by shoving massive infrastructure spending off balance sheet, including through privatising assets via accounting tricks like Public Private Partnerships (PPPs). In the process, this has created substantial hidden costs for residents – effectively ‘private taxes’ – via things like tolls and user pays charges.

With this background in mind, senior NSW government figures are reportedly concerned about keeping a multi-billion-dollar program for ­infrastructure rolling amid a blow-out in the state’s debt, and are proposing selling-off the state’s remaining assets. From The AFR:

…senior figures say a sale of the state’s remaining electricity ­assets would help pay for large infrastructure projects such as the Western Metro, and prevent the government going further into debt.

Several senior ministers are said to privately support a sale of the remaining 49.6 per cent of Ausgrid. The 2016 sale of a 50.4 per cent stake raised $16.2bn, helping pay for the Northwest and Southwest metro projects…

Labor Treasury spokesman Ryan Park said: “The NSW Liberals’ and Nationals’ gift to the people of NSW is the highest state debt on record by 2022.

“This government’s fire sale of our public assets has not only resulted in higher power bills and higher tolls for working families across NSW, it has also left a giant hole in our balance sheet.”

If the federal government wants to persist with its mass immigration madness, against the wishes of the NSW Government, then it must stump-up the funds. The federal government will only consider slashing immigration when it is forced to bear the costs.

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