AFR scaremongers over “smaller Australia”

The big business shills at The AFR View have penned a spurious article proclaiming that “Australia’s stalled population growth must be resumed” because “a smaller Australia would come at a high cost in jobs, houses, prosperity and security”.

Let’s debunk The AFR’s key arguments.

First, The AFR claims that we are facing a “smaller Australia”:

Australia is in the midst of a population stall… [We] could now have 1.5 million fewer people than expected by the end of the decade…

Migration is expected to rebound towards more historic levels of about 200,000 by 2023 or 2024. That would be enough to start making up for the falling birthrate. But for a country that reached 25 million people in 2018 – 22 years earlier than was forecast in the first Intergenerational Report in 2002 – it’s an unusual situation.

Actually, the 2021 Population Statement, released this week, explicitly states that “the population of Australia is projected to increase from 25.7 million in 2020-21 to 29.3 million in 2031-32”:

The Intergenerational Report projects that Australia’s population will swell by 13.1 million people (a 50% increase) in only 40 years on the back of 235,000 annual immigration, which will add the equivalent of another Sydney, Melbourne and Brisbane to Australia’s current population:

Australia's projected population growth

Only in the warped mind of The AFR would a population increase of 3.6 million people in 11 years and 13.1 million people in 40 years be considered a “smaller Australia”.

Next The AFR scaremongers over the worst skills shortages in living memory:

The immediate problem is that there are now 15 per cent fewer skilled visa holders, who usually buffer blows to the economy, than there were before the pandemic. Skills shortages are the worst that anyone can remember…

Hilariously, exactly the same arguments were made by businesses to a Senate Inquiry in 2002:

‘According to the Australian Chamber of Commerce and Industry (ACCI), the lack of suitably qualified staff has been a major concern for Australian industry over the past decade, and is one of the most significant barriers to investment…

‘The Australian Industry Group (AiG) … reports that several industry sectors, including manufacturing, are continuing to experience serious skill shortages which, unless effectively addressed, may have severe and lasting consequences for Australian enterprises…

‘The Business Council of Australia submission points to the risk of future broad-based skill shortages resulting from an ageing population’…

Despite decades of strong skilled migration, whereby literally millions of foreign workers were imported into Australia, industry, the federal government and media continue to make identical claims about chronic skills shortages.

How could this possibly be? How could Australia have such dramatic skills shortages after all these years? And why then is Australian wage growth tracking at close to its lowest level in history if skills shortages are so pervasive? Something doesn’t add up.

Next The AFR repeats the canard that more migrants will rescue the budget and help pay off Australia’s debt:

Without migration, it will prove far harder to grow our way out of the $1.1 trillion in gross debt by 2025, outlined in last week’s midyear economic outlook. Migration usually contributes about 1 per cent of GDP a year, and working-age migrants who become residents put more into government coffers than those born and educated in Australia.

It is migrants who will pay for the ageing of the existing workforce. On top of Australia’s higher debts, the cost of ageing is rising beyond expectations.

The skilled migrant stream only accounts for around 60% of Australia’s permanent migrant intake (including the humanitarian intake). And only around half of the skilled stream are primary skilled migrants, with the rest being migrating family members. All categories of migrants are paid less than the general population, with the only exception being primary skilled migrants. This is shown clearly by the Continuous Survey of Australian Migrants (extract shown below):

CSAM 2018

Migrants are paid less than the general population.

Thus, the suggestion that migrants are ‘rivers of gold’ for the budget doesn’t add up.

Moreover, Treasury’s model used to calculate fiscal impacts from migration deliberately ignores costs imposed on state budgets from providing the many goods and services required to sustain bigger populations (e.g. infrastructure, education and social services):

The OLGA [OverLapping Generations model of the Australian economy] and FIONA [Fiscal Impact of New Australians] results presented in this report do not capture the broader economic, social or environmental effects of migration such as technology spillovers or congestion. The FIONA results presented here do not capture the fiscal impacts of migration on state or local governments.

Sadly, the Treasury never takes proper account of the costs of big migration – either financial or non-financial – since these are borne primarily by the states and residents at large.

This explains why the Intergenerational Report banged on incessantly about the rise in healthcare and pension costs from population ageing, but completely ignored the gigantic cost of infrastructure required to house an additional projected 13.1 million people over the next 40 years – the equivalent of adding another Sydney, Melbourne and Brisbane to Australia’s existing population. These infrastructure costs are borne by the state governments and residents (via user charges), so can be dismissed altogether by Treasury.

I bet if the federal government was required to internalise the cost of immigration by paying the states $100,000 per permanent migrant that settles in their jurisdiction, so that the states can adequately fund the extra infrastructure and services required, then Treasury would no longer tout the ‘fiscal benefits’ of immigration.

Making the federal government share the benefits and costs of immigration would be a surefire way of reducing the intake back to sensible and sustainable levels.

Next, The AFR tries to claim that mass immigration is not a ‘ponzi scheme’:

Migration is often miscast as a Ponzi scheme, lazy growth in which migrants service other migrants to produce headline GDP gain that is neither sustainable nor worthwhile. That’s a fundamental misreading of the character of Australia.

Unlike most of its developed peers, Australia is still a frontier economy with untapped resources, and its biggest days in front of it… More people are needed to fulfil that potential…

But a smaller Australia will have a big cost: fewer jobs, fewer houses, less growth and less security too. The great population stall must be short-lived.

Most of Australia’s export income is earned in regional Western Australia and Queensland, whereas the overwhelming majority of Australia’s immigration has landed in the capital cities (especially Sydney and Melbourne).

This immigration, in turn, has driven huge trade deficits in the migrant epicentres of New South Wales and Victoria:

Anybody with a shred of common sense would recognise that sharing Australia’s fixed mineral endowment (and commodity exports) among millions more people will necessarily dilute per capita incomes and living standards (other things equal). It is basic maths.

Does The AFR believe that residents of Brunei, a rich oil-exporting economy, would be wealthier if its population was 1.5 million instead of 500,000 people? The same principle applies to Australia.

The mass immigration program ran in the 15 years pre-COVID also suppressed Australia’s productivity growth, mainly by diverting resources (eg, capital and labour) from the tradable to non-tradable sectors.

Australia has held the pillow over its globally exposed manufacturing and replaced its employment with careers in a never ending housing construction sector that never provides enough homes for Australian housing to become cheaper for Australians.

Tradable goods and services are those that can be sold at locations other than at the place of production (i.e. can be exported overseas). Non-tradable products are those than can only be sold at the place of production (eg, coffees, personal training and haircuts). Tradable firms are typically more productive than other businesses because they benefit from economies of scale and must be competitive against firms both nationally and internationally.

Thus, the diversion of resources resulting from mass immigration encourages growth in low productivity ‘people-servicing’ industries, alongside diverting the nation’s productive effort into houses and infrastructure.

Australia’s economic performance over the pre-pandemic years are consistent with this argument given the fall in both productivity and non-mining business investment as the Australian economy because increasingly concentrated on ‘people servicing’.

The world has 7.6 billion people. We don’t need to import them to sell to them.

Besides, most Australians do not want a return to pre-COVID levels of immigration, as evidenced by recent opinion polls.

Australians recognise that the mass immigration program of 2005 to 2020 was managed appallingly and crush loaded everything in sight, resulting in widespread infrastructure bottlenecks across Australia’s major cities and reduced liveability.

Sadly, the shills at The AFR shamelessly represent vested interests in the property/business lobby rather than the Australian people.

Unconventional Economist
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Comments

  1. What turd brain wrote
    “Unlike most of its developed peers, Australia is still a frontier economy with untapped resources, and its biggest days in front of it… More people are needed to fulfil that potential…”
    Not even worth rolling into, if any AFR readers buy this or the rest of it, Australia really is run by second rate people.

  2. It’s past time for the citizens of Australia – for the citizens of the world for that matter – to take control of their destinies. Leadership, elected via primitive, semi-democratic at best Westminster-style voting systems once had some semblance of usefulness. Since the introduction of Thatcher and Reagan’s modern neoliberalism, it’s been 40 years of declining living standards for the majority.

    • “It’s past time for the citizens of Australia – for the citizens of the world for that matter – to take control of their destinies. ”

      Hehe, they can’t even take control over having an experimental toxin tainting their blood… good luck!

      “Leadership, elected via primitive, semi-democratic at best Westminster-style voting systems once had some semblance of usefulness. Since the introduction of Thatcher and Reagan’s modern neoliberalism, it’s been 40 years of declining living standards for the majority.”

      No, what we are experiencing is identical to what Aristotle described about Democracy being the tyranny of the mob. There’s a reason why the US was founded as a Republic rather than a Democracy…. Democracy was a known concept in 1776, they purposefully chose to NOT be a Democracy.

      The decisions which benefitted Western society and made it more prosperous and more technologically advanced above all others, were sewn in an era before we headed towards ‘greater’ democracy. It’s a testament to the power of these institutes that they lasted 100+ years in the midst of Toxic Diversity before this deadweight caused them to crumble too.

      But overall, it’s OK, we did vote for this. We should be happy, this is what freedom feels like.

      Fall of Empire is a historical phenomenon, we’re caught up in a cycle…..

      A hard fall follows,. I’m sure when the modern world raises sons who are taught to cry at the drop of a hat about their feelings, and their 42 BMI daughter with a Down’s Syndrome kid are well suited to adapt to a post-civilised world with everyone contesting scarce resources…

      • Jumping jack flash

        “what we are experiencing is identical to what Aristotle described about Democracy being the tyranny of the mob.”

        This!!!

        Democracy is just “mob rule” with a catchier name.
        It becomes very obvious once you’re not part of the mob.
        Democracy flies under the radar because the parameters for being a part of the mob are fairly broad and usually malleable.

        I read a job ad this morning that stated that applicants must be fully vaccinated. It was a STEM job with no customer facing component.

        The same ad then went on to have a diversity and inclusion spiel at the end saying that the company does not discriminate and welcomes all people from all walks of life, religions and orientations, etc, etc, etc. All the usual stuff that companies like to virtue signal with… but anyone who chooses not to be vaccinated need not apply, and gtfo!

        • Ailart SuaMEMBER

          “Democracy is just “mob rule” with a catchier name.”

          Our ‘democracy’, I’m afraid; particularly over the past 40 years, falls directly into the category of fascism – aka, ‘Corporate rule’ under the guise of ‘puppet’ governments via a voting system that ensures each and every election produces either the red government or the blue government.

          BTW, what’s your solution?

          • Jumping jack flash

            The main problem is it is human nature to classify things into “black” and “white”; “good” and “bad”, and that produces “inclusion” and “exclusion”. As such it is a fundamental part of our human nature to arrive at a system of government exactly the same as what we have now, as you say with “red” and “blue”.

            To change it to something fundamentally different would be considered unnatural. Having three (or even more) choices simply doesn’t work for very long, if it even does work at all, ever.

          • “Our ‘democracy’, I’m afraid; particularly over the past 40 years, falls directly into the category of fascism – aka, ‘Corporate rule’ ”
            Fascicm is a left wing ideology, Corporate just means “body”. In the context of a political persuasion, it means collective. Mussolini’s Fascism was a Syndicalist movement, essentially one monolithic trade union.

            The greatest spearhead of fascism in Australia are the Union backed Industry funds.

            “under the guise of ‘puppet’ governments via a voting system that ensures each and every election produces either the red government or the blue government.”

            All powerful governments are a type of socialism, of left wing government. They are strictly adhering to the power to CONTROL, and of DISTRIBUTION, of the means of production.

            BTW, what’s your solution?”

            Only people with sole citizenship and a job can vote (republic) WITH the provision that the government enacts full employment policies.

          • To change it to something fundamentally different would be considered unnatural. Having three (or even more) choices simply doesn’t work for very long, if it even does work at all, ever.

            You know there are countries in Europe that regularly form Coalition Governments involving 3+ parties, right ?

      • Ailart SuaMEMBER

        Interesting response, RP. So, I daresay you don’t have any issues with policy interference by way of political donations emanating from corporate elites and wealthy individuals.

        I have always been of the belief that the USA chose to be a Republic (a state in which supreme power is held by the people and their elected representatives), because they wanted to sever ties with the British Monarchy.

        “I’m sure when the modern world raises sons who are taught to cry at the drop of a hat about their feelings, and their 42 BMI daughter with a Down’s Syndrome kid are well suited to adapt to a post-civilised world with everyone contesting scarce resources…”

        I would have thought the prospect of that scenario would be enough to stimulate the brain into searching long and hard for an alternate leadership selection process.

        • “Interesting response, RP. So, I daresay you don’t have any issues with policy interference by way of political donations emanating from corporate elites and wealthy individuals.”

          I have very strong views AGAINST unrestricted political donations. I don’t know how my previous post indicates I am pro-“Spoils” of politics.

          What I am saying Democracy has historically been linked with an inherent weakness. We are witnessing this weakness manifest itself before our eyes.

          “I have always been of the belief that the USA chose to be a Republic (a state in which supreme power is held by the people and their elected representatives), because they wanted to sever ties with the British Monarchy.”

          No, the concept of a Republic said we need to limit enfranchisement, not “reject a Monarchy”

          ““I’m sure when the modern world raises sons who are taught to cry at the drop of a hat about their feelings, and their 42 BMI daughter with a Down’s Syndrome kid are well suited to adapt to a post-civilised world with everyone contesting scarce resources…”

          I would have thought the prospect of that scenario would be enough to stimulate the brain into searching long and hard for an alternate leadership selection process.””

          When you’re letting soy boys and lard-asses vote, you’re going to get poor leaders.. it’s a feature, not a bug, of letting these type of people vote.

        • Jumping jack flash

          I suggest a system somewhat like Thunderdome. Maybe Squid Game?

          In any case, there are too many talkers in positions of power and in charge of things they have no business being in charge of. This leads to problems when it comes time for our leaders to stand up to those who know what they’re talking about, and knowing when they’re pulling the wool over their eyes.

          We end up with situations that we have right now, where businesses, who are all experts at their business, are able to easily get around the people in charge who are experts at nothing – certainly not experts at what they’ve been put in charge of.

          A classic example is Rudd’s mining tax. Another classic example is the banks are allowed to run rampant with the economy because nobody in charge knows any better, and don’t get me started about the recent COVID fiasco.

  3. Jumping jack flash

    “The world has 7.6 billion people. We don’t need to import them to sell to them.”

    We do when our economy is primarily “mum and dad” SMEs that provide services and sell imported items.
    Apart from those few bananas we dig up and grow and export to the world.

    Long live the Banana Republic of Australia!

    Let’s hope our banking masters don’t do anything stupid and turn off the debt taps… debt is all we’ve got at this point to maintain our living standards and general “way of life”.

  4. One is sure MB and Van O know the real issue that is masked by obsessions about headline population and undefined ‘immigration’.

    Australia like elsewhere has an ageing population and a thinned out population pyramid when looking at our long term permanent population ex. (UNPD) NOM temp churn over ‘noise’ in the data vs. OECD data parsing out the same short term ‘noise’. We have increased dependency ratios due to more retirees/pensioners while our working age or workforce has passed the sweet spot in age, hence, paying taxes to support budgets.

    What is the long term solution? Cut services, pension and Medicare access (political suicide) or raise PAYE taxes etc.?

    • Raise the retirement age, dependency on the RHS of the age distribution curve is an arbitrary line in the sane.

      Move it.

    • The costs of an ageing population are trivial and can be met by the existing population. And population growth makes a big difference to the infrastructure bill which is north of 100K per migrant – and which you never fail to ignore.