Former Productivity Tsar shreds ‘Big Australia’ policy

Over the Christmas break, The Australian’s Tom Dusevic published a terrific article entitled “Does the pandemic mean the end of Big Australia?”, which carefully unpicked Australia’s mass immigration ‘Big Australia’ policy, which has been in effect since the early 2000s.

In this article, Dusevic describes the fault-lines in the population debate.

On one side, are those who see high immigration as ecologically unsustainable, a threat to the social fabric and a Ponzi scheme to perpetually pump up our market size for the benefit of big business and the university sector.

On the other side, Dusevic nominates the pro-growth cabal of big-business, property developers and globalists who lobby strongly for mass immigration.

While the whole report is well worth reading, for mine the former head of the Productivity Commission, Gary Banks’ comments on the limited economic benefits and significant costs of mass immigration is the most pertinent commentary:

“One finds time and again a failure to distinguish immigration’s effects on the economy as a whole, from the effects per person or household,” [Banks] tells Inquirer. “Immigration obviously increases the size of our population and thus our economy. But it need not raise the incomes or living standards of the existing population. And that should be the primary goal, at least in economic terms.”

And while we’re on those “famous 3Ps”, Banks says they are often wrongly used to suggest that population, the first P, is as important to growth as the other two.

“That has some validity on the aggregate numbers,” says the professorial fellow at the Australia and New Zealand School of Government, where he was once chief executive and dean.

“But in per capita income terms, empirical studies by the Productivity Commission and others have repeatedly found that the gains from immigration are small and largely skewed to migrants themselves. And that’s without considering environmental and other negative impacts”…

One-time productivity tsar Banks says that when he was treasurer, Scott Morrison publicly defended historically high immigration by citing Treasury calculations of how much tax revenue would be foregone with lower numbers.

“That is a pretty narrow way of looking at immigration, to put it mildly,” he said. “It ignores the cost side of the equation for a start.

“It ignores the capacity of our economy and society to absorb migration running at more than twice the rate Treasury itself had previously projected. More people obviously require more infrastructure and more services.

“Those costs are largely borne by the states. But that does not mean they should be ignored”…

Former productivity tsar Banks argues the most important Ps for living standards are participation and productivity.

“To the extent that migrants are more highly skilled than locals in areas where these are needed, then of course that should help our overall productivity performance,” he says.

“But there are questions as to whether in practice migrants have been meeting that test. Indeed there is some evidence that the definition of ‘skill’ has got more elastic and permissive over time. The surge in the skilled immigration over the past decade coincided with a slump in Australia’s productivity performance, which also is not encouraging”…

Gary Banks says it is often difficult to understand what is going on in key areas of immigration that have a big effect over time, such as the temporary and student categories. “When policies are developed behind closed doors, they obviously favour those with political connections who have most at stake. That’s as true of immigration as it was of industry protection,” he says.

“Business groups and the universities naturally want to maximise the intake so as to increase their markets and their revenues. But immigration has wider costs and benefits across the community. These need to be assessed and discussed in an open way before decisions are made.

“The present hiatus provides a unique opportunity to take stock and proceed in a way that would promote greater public trust.

“It’s a fair bet that if immigration gets reset without the pros and cons having had a thorough public airing, government will face a backlash and yet more pressure to retreat.

“There has to be a better way.”

Bravo Gary Banks. My only gripe with your sermon is that I wish you had said as much — and often — when you were head of the Productivity Commission. Maybe then our leaders would not have gone down the ‘Big Australia’ path in the first place.

Unconventional Economist
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