IGR used as propaganda tool to ramp-up immigration

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Treasurer Josh Frydenberg will use today’s Intergenerational Report (IGR) as ammunition to reopen the mass immigration floodgates, according to The AFR:

  • “Australia will be mired in debt and deficit for at least the next 40 years unless it boosts skilled migration, workforce participation and productivity”.
  • “A well-targeted and sustainable skilled migration program” will be spruiked as an essential ingredient to repair the federal budget over the longer-term.
  • “The IGR says Australia’s population, now about 25 million people, will reach 38.8 million by 2060-61. The last IGR released in 2015 forecast a population of almost 40 million by 2054-55”.
  • “Slowing population growth is largely responsible for the IGR downgrading economic growth forecasts from the 3 per cent average annual rate of the past 40 years to 2.6 per cent over the next four decades”.
  • “This means the economy will be smaller and Australia’s population will be older than it otherwise would have been, with flow-on implications for our economic and fiscal outcomes”, Treasurer Josh Frydenberg will say.
  • “A well-targeted, skills-focused migration program can supplement our stock of working-age people, slow the transition to an older population and improve Australia’s economic and fiscal outlook”, Frydenberg will say.

Earlier this month, I comprehensively debunked the mass immigration solution to population ageing on the grounds that:

  • Migrants also grow old. Therefore, immigration can only slow population ageing, while also adding a host of other economic and environmental costs from having a substantially larger population (e.g. lower real wage growth, crush-loaded economic and social infrastructure, forcing people to live in apartments rather than houses, and environmental degradation).
  • The empirical evidence of the prior 15 years of mass immigration was unflattering with Australians experiencing:
    • Falling productivity growth;
    • Falling real wage growth;
    • Stagnant real per capita household disposable income;
    • Stagnating growth in real GDP per capita;
    • Rising congestion, smaller and more expensive housing and reduced liveability across Sydney and Melbourne due to extreme population growth; and
    • Soaring infrastructure costs due to diseconomies of scale plus waste as governments desperately tried to keep pace with unforeseen extreme growth.
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In short, the IGR and Morrison Government have myopically focused their attention on the costs of ageing on federal budget finances while ignoring entirely the costs of high immigration on state budget finances and the community at large.

Adair Turner, Chair of the Energy Transitions Commission and former Chair of the UK Financial Services Authority, provided important counterpoints to the IGR’s myopic analysis earlier this month:

True, when populations no longer grow, there are fewer workers per retiree, and health-care costs rise as a percent of GDP. But that is offset by the reduced need for infrastructure and housing investment to support a growing population… By cutting that waste and spending more on health care and high technology, [countries] can continue to flourish economically as the population declines.

Meanwhile, a stable and eventually falling global population would make it easier to cut greenhouse-gas emissions to avoid climate change, and alleviate the pressure that growing populations inevitably place on biodiversity and fragile ecosystems.

And contracting workforces create stronger incentives for businesses to automate, while driving up real wages, which, unlike absolute economic growth, are what really matter to ordinary citizens.

In a world where technology enables us to automate ever more jobs, the far bigger problem is too many potential workers, not too few.

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Adair Turner’s arguments are identical to those that have been articulated by MB over many years.

Sadly, instead of using the coronavirus pandemic as an opportunity to reset Australia’s immigration program to sensible and sustainable levels that maximises community wellbeing, Australia’s policy makers are hell bent on returning to the lazy dumb growth policy of the prior 15 years that delivered falling living standards.

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.