Budget can’t hide immigration and energy blunders


I spoke about the upcoming budget and the immigration overflow during an interview with Sky News’ Danica De Giorgio on Monday night.

I explain that the federal budget is likely to include rental and energy subsidies to cover its policy failures.

I also explain why the federal budget will come under pressure as unemployment rises, immigration cools, and commodity prices deflate.

We also discuss how the federal government uses immigration to artificially boost the budget while pushing costs onto the states.


The Budget:

Jim Chalmers has already confirmed that cost of living relief will be included in next week’s budget. He also said that this relief is going to take the edge off inflation rather than add to inflation.

This, to me, sounds like we are going to see a further extension of Commonwealth Rent Assistance as well as energy subsidies.


And to be quite frank, the federal government has created the rental crisis through its massive immigration policy. It has also contributed to the energy crisis by completely messing up energy policy.

So, I think the least it can do is provide subsidies to cover the pain.

Provided these subsidies are calibrated correctly, the target areas of clear inflationary pressure in the rental market and energy prices, they can actually take some steam out of CPI inflation.


So it can actually help the RBA do its job in getting inflation under control. So they can actually be positive, provided they are calibrated correctly and they don’t just give money to people to pump up inflation.

I think the federal government is undoubtedly going to deliver a budget surplus. The reason is that the surplus has been driven by three booms.

We’ve had record immigration, which has increased the number of workers. We’ve had record bracket creep because taxes have all gone up. And we’ve also had record high commodity prices.


The big question is what will happen going forward. We’re likely to see commodity prices fall, which will reduce company taxes.

We’re also likely to see a rise in unemployment that’s already forecast, as well as lower levels of immigration.

So, that will take the sting out of the federal budget going forward.


Immigration Ponzi Scheme:

Record migration is like a Ponzi scheme. The federal government is the major beneficiary of Australia’s immigration program because it collects 80% of the nation’s taxes, whilst the costs are pushed onto the states and onto you and me.

The federal government has been the main beneficiary of this massive 550,000 migrant increase last year and that’s because it has basically juiced personal income taxes and company taxes.


On the flip side of that, the poor old state governments have been left with the costs of providing services and infrastructure to the ballooning population.

And that’s why our state governments are actually drowning in debt and they are facing credit downgrade.

So, if I were the states, I’d be screaming blue murder about this and I would be demanding money from the federal government so that they provide money for every new resident that lands in their jurisdiction to provide money for infrastructure, etc.


I guarantee you that if the federal government were required to pay the states, say $50,000 per new resident, it would cut immigration quick smart. Because it would have to balance the benefits with the costs.

Because at the moment, all the federal government sees with immigration is dollar signs.

We’re actually already in per capita recession.


The nation’s growth actually fell by 1% last year in per capita terms and all that tells you is the economy is not growing as fast as the population.

So we are going backwards per head. It’s the same for housing. We’re not building housing to keep up with immigration. We’re not building infrastructure to keep up. Business investment isn’t keeping up, so productivity is going backwards.

Basically, we’ve got what I call a rat wheel economy. We’re spinning around in circles but we’re not going anywhere. In fact, we’re going backwards.

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.