Ode to Peter Martin, immigration extremist

By Leith van Onselen

If you want a classic example of how the once mighty ABC has gone to the dogs, look no further than the above discussion of immigration and a ‘Big Australia’ aired on The Drum last Friday.

The segment featured a discussion with Fairfax’s Peter Martin (an avid mass immigration supporter), Dai Le (Fairfield City Councillor), and Tracey Howe (NSW Council of Social Services).

According to Peter Martin, running a mass immigration program is unambiguously beneficial and makes Australia “more prosperous”:

“More people does mean more prosperity… This has proved to be the case. We have a real problem though that ideally we’d create a new city. But I don’t think we are able to anymore…

It’s a question of where you put the people. And we know that when people are in the centre of cities, that’s where the high value jobs are. That’s where the contribution to GDP is… The only answer I think to where to fit these people in is… infill – it’s taking those suburbs and turning one house into two or three… that’s what we are going to have to do… I can’t think of another place to put these people who will make us richer”.

The key threshold issue that needs to be assessed when discussing immigration is whether the current settings are making incumbent residents better-off? Don’t just take my word for it – the Productivity Commission (PC) explicitly noted the same in its recent Migration Intake into Australia report:

The Australian Government should… specify that the primary objective of immigration and the Government’s population policy is to maximise the economic, social and environmental wellbeing of the Australian community (existing Australian citizens and permanent residents) and their future offspring.

Unfortunately for Peter Martin, the evidence does not support the notion that current mass immigration settings are making incumbent residents better-off. The evidence appears to be to the contrary.

In 2006, the PC completed a major study on the Economic Impacts of Migration and Population Growth, which modeled the impact of a 50% increase in the level of skilled migration over the 20 years to 2024-25 and found that “the incomes of existing resident workers grow more slowly than would otherwise be the case”.

The PC’s latest report, while it didn’t model distributional impacts from immigration, did find that real wages under existing mass immigration settings would be lower than would exist under zero net overseas migration (NOM):

Compared to the business-as-usual case, labour productivity is projected to be higher under the hypothetical zero NOM case — by around 2 per cent by 2060 (figure 10.5, panel b). The higher labour productivity is reflected in higher real wage receipts by the workforce in the zero NOM case.

Martin has conveniently ignored the many costs of running a high immigration program, which are borne by the incumbent population and unambiguously lowers their welfare. Again, here is the PC’s assessment of these costs:

…whether migration delivers an overall benefit to the existing Australian community will also depend on other factors, including the distribution of those economic benefits, and the broader impacts of immigration, notably the associated social and environmental impacts…

High rates of immigration put upward pressure on land and housing prices in Australia’s largest cities. Upward pressures are exacerbated by the persistent failure of successive state, territory and local governments to implement sound urban planning and zoning policies…

Urban population growth puts pressure on many environment-related resources and services, such as clean water, air and waste disposal. Managing these pressures requires additional investment, which increases the unit cost of relevant services, such as water supply and waste management. These higher costs are shared by all utility users…

Immigration, as a major source of population growth in Australia, contributes to congestion in the major cities, raising the importance of sound planning and infrastructure investment …governments have not demonstrated a high degree of competence in infrastructure planning and investment. Funding will inevitably be borne by the Australian community either through user-pays fees or general taxation.

Hence, running a high immigration program becomes increasingly costly for existing residents. A classic example is infrastructure, where the PC in 2013 warned that total private and public investment requirements over the next 50 years are estimated to be more than 5 times the cumulative investment made over the last half century!

Peter Martin’s suggestion that Australia’s big cities are the drivers of prosperity, and that simply importing more people would make us richer, is patently false.

Like it or not, Australia pays its way in the world primarily by selling-off our fixed mineral endowment. Importing more people necessarily means that Australia’s minerals base must be spread more thinly across a larger population, which necessarily make Australians poorer (other things equal). Again, the PC has made similar observations:

“Australia has considerable natural resources in regard to mineral wealth. As non-renewable resources deliver rents for those who extract them and for governments in the form of resource royalties and taxes on company profits, a larger population means those rents that are captured by government are shared across more people”.

To illustrate, consider the below chart, which shows that Australia’s rural and regional areas provide Australia with not only its food, but also the lion’s share of its export revenue, which is effectively what pays for Australia’s imports (consumed mostly by city dwellers):

Increasing the number of people via mass immigration does not materially boost exports but does increase imports (think flat screen TVs, imported cars, etc). Moreover, it requires Australia to sell-off our fixed mineral assets quicker to maintain a constant standard of living (other things equal).

Put another way, Australia would ship roughly the same amount of hard commodities and agriculture regardless of how many people are coming in as all the productive capacity has been set up and it doesn’t require more labour. So basically we are wrecking the trade balance by more people coming in each year (mostly to Sydney and Melbourne) because of all the additional imports.

Anyone disputing this view only needs to look at the below charts showing the stalling of export growth amid the sharply deteriorating trade balances in NSW and VIC, which of course have been the primary destinations of migrants:

Which has driven gigantic trade deficits in Australia’s two biggest states:

Meanwhile, the infrastructure deficits in both Sydney and Melbourne, along with congestion, housing affordability and overall liveability worsens each year as more and more people flood into each city and push against infrastructure bottlenecks amid woeful planning.

In short, having bigger cities means a less competitive Australian economy and a wider current account – hardly a desirable situation. And yet people like Martin and his fellow panelists claim this represents economic progress!

But wait, it gets worse. Peter Martin also claimed that Australia has no control over population policy and a ‘Big Australia’ is inevitable:

“It [a Big Australia] is going to happen. What are you going to do. Are you going to stop people having children? Are you going to make sure that people die earlier? Are you going to stop immigration – will we have an open border with New Zealand? If the conditions are right, they will come in. If they are not right, they won’t. YOU CAN’T CONTROL THE POPULATION SIZE – you can just work out what to do with it. All of these people who argue for a small Australia, it’s not going to happen”.

Sorry Peter, but Australia’s immigration intake is the primary determinant of Australia’s ultimate population size. If you don’t believe me, just read the PC’s latest report:

“FINDING 3.1: With low and stable rates of natural population growth, decisions about the size of the permanent and temporary immigration intake amount to a de facto population policy”.

The PC notes in its report that it is a policy choice how ‘big’ Australia becomes, not a fait accompli. That is, if Australia chooses to persist with current immigration settings, its population will hit more than 40 million mid-century, whereas if it were to cut NOM to zero, it would grow to only 27 million – a difference of at least 13 million:

With regards to Martin’s argument about New Zealand, nice straw man. Is Martin aware that Australia is currently running an immigration deficit with New Zealand?

Despite this, Australia’s NOM has remained at turbo-charged levels far above historical norms:

Clearly Kiwis are only bit-part players in Australia’s immigration program, and yet Martin has chosen to obfuscate the debate.

The other panelists were just as bad as Martin. Their main reason for continuing with mass immigration was to overcome an ageing population:

Host: “With an ageing population, do we need more people”?

Tracey Howe: “Of course we do… All we have to do is say that we are going to make the investment and people will come… Australia’s massive – bring them in”…

Dai Le: “We have not mentioned the need for population growth because of the ageing population”.

Host: “Because we dare not speak about it”…

Dai Le: “Dick Smith is saying ‘no’, but the thing is no is not good because I mean I think Japan is the country that has no population growth but they’ve got huge ageing population, and they are kind of shrinking. So, therefore, we don’t want to go down that path…”

For more than a decade, the PC has debunked the myth that immigration can overcome population ageing:

• PC (2005): “Despite popular thinking to the contrary, immigration policy is also not a feasible countermeasure [to an ageing population]. It affects population numbers more than the age structure”.
• PC (2010): “Realistic changes in migration levels also make little difference to the age structure of the population in the future, with any effect being temporary“…
• PC (2011): “…substantial increases in the level of net overseas migration would have only modest effects on population ageing and the impacts would be temporary, since immigrants themselves age… It follows that, rather than seeking to mitigate the ageing of the population, policy should seek to influence the potential economic and other impacts”…
• PC (2016): “[Immigration] delays rather than eliminates population ageing. In the long term, underlying trends in life expectancy mean that permanent immigrants (as they age) will themselves add to the proportion of the population aged 65 and over”.

In short, trying to overcome an ageing population through higher immigration is a Ponzi scheme. It requires ever more immigration, with the associated negative impacts on economic and social infrastructure, congestion, housing affordability, and the environment.

Dai Le’s claim that Australia needs immigration so that we don’t become like Japan also does not pass scrutiny.

Over the period 2003 and 2015, there were five OECD nations that experienced declining populations. These are charted below against Australia’s mass immigration population ponzi:

If it was true that population growth was such an economic boon, then you would expect that GDP per capita would have experienced anaemic growth in these countries. And yet the data shows anything but, with the nations experiencing the biggest population declines – Hungary, Germany and Estonia – experiencing stronger GDP per capita growth than Australia:

And what about Japan’s unemployment rate of just 2.8%? How is this a disaster economically?

The panelists should also consult the economists at MIT, which recently found that there is absolutely no relationship between population aging and economic decline. To the contrary, population aging seems to have been associated with improvements in GDP per capita, thanks to increased automation:

If anything, countries experiencing more rapid aging have grown more in recent decades… we show that since the early 1990s or 2000s, the periods commonly viewed as the beginning of the adverse effects of aging in much of the advanced world, there is no negative association between aging and lower GDP per capita… on the contrary, the relationship is significantly positive in many specifications.

In short, the ABC panelists need to learn some basic economics as well as recognise that it is the living standards of the incumbent Australian population that is the threshold issue in the immigration debate. Living standards in the major cities are unambiguously being eroded by mass immigration via negative externalities that are not captured in the national economic accounts, such as increasing congestion, falling housing affordability, environmental degradation, etc.

Finally, pursuing high immigration is a growth fig leaf for governments and associated rent-seekers to pretend they’re doing the job rather than pursuing the more difficult but ultimately much wider benefits of productivity-directed reform. The ABC panelists have unknowingly played straight into the growth lobby’s hands.

[email protected]