Economists reject return to mass immigration ‘Ponzi’ economy

Martin North and I were interviewed last week by the Daily Mail’s Alison Bevege, where we both rejected the notion of returning the Australian economy to its pre-COVID-19 “Ponzi” state:

Australia had become too dependent on housing construction fuelled by a giant mortgage debt bubble and unsustainable mass migration…

Economist Martin North said the time is right for the government to splash out on strategic infrastructure projects to create thousands of jobs, saving the country from a potential depression.

‘It’s a huge opportunity if people could see it,’ he told Daily Mail Australia.

‘We have to take a strategic view. Interest rates are low and the government has the ability to borrow big.

‘We need to capitalise on that and don’t worry about the budget being balanced.’

Mr North said there were plenty of useful projects to create the jobs needed to help Australia out of the coronavirus downturn, including irrigation and sewer system upgrades…

Mr North said now was the time to invest in solid nation-building infrastructure that would set the groundwork for the next 30 years of Australia’s future.

However, Mr North said he feared the Government would be pressured to prop up old economic distortions such as the over-reliance on housing construction which fueled a house price bubble and unsustainable mass migration.

‘We can’t just go back to pre-covid days, it would be a major mistake,’ he said.

‘If we go backwards, we’ll just create problems for ourselves.

‘It needs to create the greatest good for the greatest number of people – not just support the construction sector…

Mr North warned that the construction sector had been lobbying for massive migration levels to prop up the sector, despite the pandemic.

Economist Leith Van Onselen, who worked for Treasury, Goldman Sachs and now writes for website Macrobusiness, said governments should take advantage of the low borrowing rates to build infrastructure now.

‘Not only would this help overcome Australia’s massive infrastructure deficit brought about by 15 years of mass immigration, but would also help stimulate the economy during a period of weak private demand and high unemployment,’ he told Daily Mail Australia.

Mr Van Onselen said the nation-building benefits would be undone if the government reverted back to mass migration.

‘This would overload the new infrastructure and lift labour supply, thus being self defeating,’ he said.

Wages had already stagnated due to an oversupply of labour before the coronavirus pandemic hit.

The Australian’s Judith Sloan has also today rejected a return to mass immigration:

Promoters of a Big Australia never give up, irrespective of the circumstances. Strong economic growth? We need more migrants. Weak economic growth? We need more migrants. The answer is always the same.

What’s worse than the constant, self-serving urgings is that these interest groups clearly have the ear of most politicians at all three tiers of government…

In the past decade, per capita GDP has gone nowhere despite high levels of NOM… The work of the Productivity Commission, for instance, highlights that any positive impact on per capita GDP of migrant intakes is very lagged — there is dilution of the capital stock in the meantime — and that almost all the benefits are captured by the migrants themselves…

Lobbyists arguing this case are not concerned that new mig­rants may take the jobs of Australians at a time of high unemp­loyment. Nor are they worried that the source countries may be best served by keeping their skilled workers and students. Commercial interests are at stake. The strategy is to conflate these interests with acting in the national interest…

Sadly, us ‘rebel’ economists will be ignored and immigration will be ramped-up at the earliest opportunity. Money talks.

Leith van Onselen

Comments

  1. Now that Ben Fordham is doing 2GB breakfast, you might be able to get on his show rather than McLaren’s. Sloan would be unlikely to go on without Jones because she writes for News.

  2. SamscoutMEMBER

    You don’t need to borrow – the RBA can issue it’s own capital to build infrastructure- why line the pockets of foreign and private banks.

    • Blottridesagain

      When you build infrastructure that you haven’t saved for you have to borrow money and create REAL debt that you owe to foreigners. Let’s think
      Cranes – imported
      Dozers – Imported
      Diggers of all sorts – imported
      Loaders – Imported
      Trucks – Imported
      Generators – imported
      Tradies utes – Imported
      Tradies tools – imported
      TV’s, lounges, phones, boats et al bought as a result of the stimulus – Imported
      You get real foreign debt!
      The projects, in Australia’s case, need to be assessed on the return they will achieve in foreign currency. Unfortunately, because of the distortion of the economy over multi-decades and a grossly over-valued A$, no infrastructure project that will earn sufficient export income will pass the return test in terms of A$. The only infrastructure build on that measure would be in cities where ZERO foreign currency is earned despite the expenditure of BILLIONS of foreign currency expended.

      • Jumping jack flash

        Infrastructure projects are a waste. You build it. It gets completed. Where is the ongoing income for the country?

        Tolls? Fares? Ticket sales? It doesn’t generate *new* income. All of that income already exists in the system and must be reassigned from some other activity that it would have been used for, like spending.

        • Pssst, don’t let on but I think the entire idea is to disguise this rent tax as income based on faux investment and employment i.e.jobs ‘n growth. In reality it’s card skimming, but you have to build an obstacle and a boom gate before you get to play. You see, once every bit of public amenity has a parking meter, toll and tax on it we will be an “efficient” service economy with kleptocrats directly plugged into your account. The meaning of ‘service economy’ is actually a sick joke.

          We only live in a free society when access to public amenity is free to the public that owns the land and resources and security for the historical amenity that your community built. Otherwise you tax drinking fountains, fresh air and walking down the street and ship in others to help with the revenue.

        • Blottridesagain

          Infrastructure is not NECESSARILY waste. For our economy, if it is assessed as per export income, then if it comes out positive return it would be good for the economy and the country – support for regions, decentraiisation etc.
          However, as it is assessed now you are exactly correct. Total waste.

          • Blottridesagain

            More efficient to do what? Get people to shops more quickly and easily to consume and spend more and create more foreign debt? Get lawyers to the centre of Sydney more quickly to create more problems for people in regions trying to actually produce stuff (and that’s no idle statement) Not trying to jump on what you said but it is way too simplistic. We need economic REAL economic analysis not just stuff that makes the life of people in city and surrounds easier and then pay them more so they can afford it and call it GDP growth.

    • DominicMEMBER

      The RBA doesn’t issue capital at all — if it ever had any it would have been granted it by the Treasury in yesteryear.

      It has a balance sheet which it manages via the printing press — money created out of thin air: never earned, never worked for.

      When the commercial and central banks create new credit it is not a ‘freebie’ — the purchasing power of the dollar you earn is being clipped in the process. Think of it as a surreptitious tax. You cannot create wealth from printing money — wealth just gets re-distributed, generally from you to recipients of transfer payments and to the 1%.

  3. Jumping jack flash

    “Strong economic growth? We need more migrants. Weak economic growth? We need more migrants. The answer is always the same.”

    That’s because it is always essential to obtain more debt.

    And how do most people become eligible for more debt? From more income.
    And what is the only way to increase incomes in this economic environment of extreme debt that absorbs all income that could be used for spending and increasing wages, and the insatiable quest to obtain ever more debt? Well, that would be wage theft.
    What does wage theft require? Cheap labour and lots of it.
    And where does the cheapest labour come from? 3rd world countries.

    So sunshine or rain, good economic conditions or bad economic conditions, the quest for debt marches on.
    The quest to obtain as much debt as humanly possible because it is absolutely essential to obtain the most enormous quantities of the stuff if we ever want to afford the things we need. Incomes are simply not enough now.

    The only thing incomes are good for is to use to service debt, until that magical day when someone hands us a stonkingly huge pile of debt of our very own to use to repay it all and have some left over to put in our pocket and finally be rich. Rich from someone else’s debt pile. The best and easiest way to get rich.

    • The migrants are actually reducing much more income than they are increasing it in a relatively small number of SME owners.