Here’s Tony Abbott’s speech at the Sydney Institute outlining the case for reducing immigration:
As someone born overseas, I could hardly be against immigration. From our beginning in 1788, modern Australia has been an immigrant society. Immigration is at the heart of who we are. The fact that so many millions have come here to build a better life, originally from the British Isles but then from the four corners of the earth, lends a heroic dimension to our national story.
Late last year, I went to an aged care Christmas party in my electorate. In the traditional costumes of their homelands, for their patients the staff had put on a concert. Their pride in Australia and their gratitude was as palpable as the service that these new Australians were rendering to the old.
So making immigrants feel unwelcome in their own country is the last thing we need. Immigration has been overwhelmingly and unquestionably good for Australia; as well as good for the immigrants who have voted with their feet to live here.
My issue is not immigration; it’s the rate of immigration at a time of stagnant wages, clogged infrastructure, soaring house prices and, in Melbourne at least, ethnic gangs that are testing the resolve of police.
It’s a basic law of economics that increasing the supply of labour depresses wages; and that increasing demand for housing boosts price. Such is the unreality of our political discourse, though, that amidst great concern about unaffordable housing and stagnant wages, no one on the front bench of government or opposition had been prepared to raise the one big contributing factor that is wholly and solely within the federal government’s control – until Peter Dutton finally said last week that immigration could be cut “if it’s in our national interest”.
Instead, federal politicians have demanded that the states boost housing supply; we have urged employers to lift wages and even promised company tax cuts – senate permitting – to make this more affordable. But the one policy lever that is least subject to interference by the states or by the senate remains strangely untouched.
It’s the federal government that sets the annual quota for how many permanent entrants will come in the “skilled”, “family reunion” and “refugee and humanitarian” categories. It’s the federal government that sets at budget time an annual migration target. It’s the federal government that sets the rules governing two and four year visas for the foreign workers that businesses say they need. And it’s the federal government that sets the rules governing the overseas students that universities want with the right to live here and then work towards professional qualifications in this country.
Migration, you see, isn’t just the number of permanent visas granted in any one year. It’s all the newcomers looking for jobs and housing and that includes many on business and student visas too.
Prior to 2003, the number of long-stay business visas never exceeded 40,000 a year. Since 2007, it’s mostly exceeded 100,000.
Prior to 2005, the number of overseas student visas never exceeded 200,000. Since 2007, they’ve always exceeded 250,000 and often 300,000.
What this means is that the figure for Net Overseas Migration (or the extra people looking for housing and jobs) that had averaged 110,000 a year in the decade to mid-2006 has doubled to 220,000 a year in the decade since – peaking at well over 300,000 under the Rudd prime ministership. These are by far the highest figures in our history.
Even at the old rate to the mid-2000s, on a per capita basis, our immigration was still about the highest in the developed world. At the subsequent and current rate, every five years, we’re letting immigration alone increase our population by about the size of the city of Adelaide.
Just 16 years ago, in the first Inter-generational Report, it was expected that our population would not reach 25.3 million till 2042. But due to current immigration levels, we’re going to achieve that figure next year – or 23 years early.
So far, our main strategy to cope has been urban infill: putting more and more people into suburbs whose schools are full, roads are choked and public transport over-crowded.
Now, over time, a bigger population has benefits, with a larger and more dynamic economy. Over time, highly skilled migrants should increase productivity in ways that lead, eventually, to more jobs and higher wages. In the short term, though, more competition in the labour market puts downwards pressure on wages and makes it harder for any individual to find work. In other words, what should be good overall in the long run can be quite hurtful in the short run.
Australia’s relatively subdued economic performance over the past decade is due to post-GFC headwinds, the fading of the China boom, more competition from third-world-countries-with-first-world-technology, disruption to established industries, and our own home-grown policy follies such as the carbon tax.
It can’t be pinned on too many or the wrong type of migrant. Indeed, high immigration has been a factor in Australia’s record-breaking run of aggregate economic growth because each new worker adds to our economy – but behind the reassuring overall figures, growth per person tells a different story.
At just 0.9 per cent over the past decade, annual economic growth per person has been anaemic compared to 2.4 per cent during the Howard years when immigration was much lower.
Over the decade to mid-2007, 2.1 million new jobs were created while net overseas migration totalled 1.2 million. In the next decade, by contrast, just 1.8 million new jobs were created while net overseas migration almost doubled to 2.2 million. So it’s not surprising that for much of this time, jobs have seemed harder to find and that more and more foreigners seemed to be filling them.
If a high-end restaurant needs an executive chef, or if a university needs a world-class quantum physicist, or if a bank needs a new CFO, it might make sense to recruit someone from overseas on a high salary; and it’s good when people making a big contribution opt to stay here. But are we really so short of willing and capable workers that backpackers must pick our crops, overseas students serve our tables, and recent migrants run our IT?
Very possibly Australians are too fussy about the jobs they’ll do, or even whether they’ll work at all given the availability of don’t-ask-questions welfare. But if it’s hard to find café or cleaning staff, maybe higher wages would help and maybe the welfare rules should be better policed. If it’s hard to find programmers, maybe companies need to do more training. And if no decent managers are available, maybe their pay might have to be increased – because that, after all, is how markets should normally work.
Skilled occupations eligible for two and four year visas currently include accommodation managers, accountants, advertising managers, agricultural technicians, air-conditioning mechanics, aircraft engineers, animal attendants, arborists, and art teachers – and that’s before proceeding beyond the first letter of the alphabet! With more than 400 occupations on the list, there are few jobs that can’t be filled by foreigners when locals don’t find the wage attractive.
Of course, people who come to this country to work and pay taxes from day one undoubtedly make great Australians, should they stay. But should it really be so easy to fill jobs from overseas rather than offer the better training or higher wages that locals want?
It’s hard to avoid the conclusion that temporary skilled visas have been a factor in allowing Australian business to neglect training and to keep wages down. You can hardly blame them given the compliance burdens and sky-rocketing costs they face, but it’s not a smart long-term way to keep a high-skill, high-wage first world economy.
Since the late 1980s, Australian house prices have been rising at well above the rate of inflation. Much of this is due to lower interest rates enabling buyers to pay more without increasing their repayments. But especially in the past decade, higher immigration has boosted demand and factored into price. Almost half a million new dwellings have been required over the decade just to meet the increase in net overseas migration.
Then there’s the integration question. As the head of the Menzies Research Centre observed last week, “something has gone badly wrong with our resettlement system when 58 per cent of refugees who have settled here in the past ten years are living on welfare”. With no insistence that refugees learn English, it’s hardly surprising that only 30 per cent of the last decade’s intake are proficient; but without the national language how can newcomers ever really find a job and fully integrate into our way of life?
Again, let me stress, I want a stronger Australia; and, over time, that should be a bigger Australia. But no Australian government should put the well-being of potential incoming migrants over that of the existing population. The programme has to be managed primarily in the interests of today’s Australians, not primarily in the interests of those who want to come here despite the contribution that many could undoubtedly make.
My government oversaw a decline of about 30,000 in annual net overseas migration. As well, we toughened up the rules against foreign purchases of existing residential properties – and actually enforced them for the first time – to give locals a fairer go in the housing market.
We began the biggest boost to roads in our history (with public transport included via an asset recycling programme with the states) in order to tackle a 30 year infrastructure deficit as quickly as possible. Taxes and regulations were cut to boost the economy and facilitate higher wages for Australian workers. And stopping the boats meant that the Australian government, not people smugglers, was once more running the humanitarian intake and we could prioritise persecuted minorities like the Christians of the Middle East.
But since then, net overseas migration has again edged up. And wage growth is still low, housing is still out of reach for young Australians, congestion is getting worse, and gang violence in Melbourne shows no sign of abating – so we need a rather bigger reduction now than we were able to deliver then.
There’s no reason why we must maintain the additional humanitarian immigration for the Syrian war that’s now winding down, or maintain that negotiated as part of a senate deal. There’s no reason why we shouldn’t insist on fluency in English as a requirement for citizenship, as the government is doing, or further revise “temporary” skilled immigration to require higher pay, higher skills and more effort to find local workers first.
At least until infrastructure, housing stock, and integration has better caught up, we simply have to move the overall numbers substantially down. A strong migration programme in the long term doesn’t preclude a smaller one in the short term especially when there’s acute pressure on living standards and quality of life.
The Howard government cut migration numbers by 30 per cent in its first two years. Of course, it would be unfair to would-be immigrants and would-be employers of skilled staff to change the rules for people already here or currently in the visa pipeline. Managing the overall numbers down to the old long-term average of 110,000 a year would inconvenience some businesses but that’s hardly unreasonable if it helps wages to grow more strongly and makes homes more affordable.
In order to win the next election, the government needs policy positions which are principled, practical and popular. And if they also outrage the Labor Party, so much the better!
Scaling back immigration acknowledges that government’s first duty is to its own citizens. It would be an act of the executive that doesn’t require tortuous negotiation with the states or the Senate crossbench. And since when is a democratic government required to ignore voters who would overwhelmingly prefer less immigration to more?
This could have been tackled sooner; so I do hope that Minister Dutton’s hints last week might quickly become a welcome change of scale.
The government needs to get serious about cutting back the immigration intake, even though the universities are likely to kick up a stink. Note that overseas student education is a joint offering: a degree plus a pathway to permanent residence.
What the government has to appreciate is that the largest group of voters are incumbents, not new migrants or even migrants who have arrived in the past decade.
Even on this point, it’s not clear that migrant groups are in favour of large migrant intakes — the pull-up- the-ladder phenomenon.
We need to give our cities a break; we need to insist that new migrants culturally integrate and speak English well; we need to acknowledge the legitimate interests and views of incumbents rather than always favour new entrants.
It would be wise for the government to heed Abbott’s advice.
Australian National University demographer Liz Allen said evidence shows the optimal rate of immigration for the Australian economy was 160,000 to 210,000 people per year, with new arrivals bringing much needed skills and tax dollars.
“Tony Abbott is suggesting a sub-optimal level of immigration, whereby we might actually see more adverse consequences of immigration intake than benefits,” Dr Allen said.
“The contributions migrants make has a positive net effect, that is migrants aren’t costing Australia more than they are contributing in terms of economics and culture.”
Dr Allen is a devotee of ANU’s Dr Peter Mcdonald whose record on immigration research can be read in different ways.
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McDonald co-authored a 1999 federal parliamentary research paper, entitled “Population Futures for Australia: the Policy Alternatives”, in which he explicitly noted that it is “demographic nonsense to believe that immigration can help to keep our population young”, while also recommending “a population of 24-25 million within 50 years” as well as “annual net migration… in the order of 80 000“. McDonald also stated “that there were difficulties in the late 1980s when net migration rose for just two years to over 150 000 per annum” and that “a sustained net migration level of 120 000 per annum is at the high end of what Australia seems to be able to manage”.
Yet today, Peter McDonald is quoted everywhere as the leading authority and proponent for much higher rates.
Dick Smith created the below video last year exposing McDonald’s hypocrisy, as well as his alleged funding links to the ‘Growth Lobby’ in favour of mass immigration:
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On Monday, ANU Demographer Dr Liz Allen debated Sustainable Australian president William Bourke on ABC’s Radio National (audio below).
In the interview, Dr Allen made several highly erroneous and misleading claims. Below are my ‘fact checks’ on her claims.
The “evidence” does not back current immigration levels:
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Dr Allen claims that the so-called “evidence” shows that the current immigration level is “optimal”, but that Australia would get diminishing returns at a level “over 210,000”. She also bases this “optimal” level “on research that was done by Peter McDonald”…
First, Australia’s net overseas migration (NOM) has averaged more than 220,000 over the past 11 years, so we have already exceeded the 210,000 limit.
Second, as noted above, Peter McDonald in 1999 recommended “a population of 24-25 million within 50 years”, and warned that “a sustained net migration level of 120 000 per annum is at the high end of what Australia seems to be able to manage”. So why has this figure been raised so aggressively. And why is McDonald not concerned that Australia’s population has already reached his “24-25 million” target some 30-years ahead of schedule?
Third, other “evidence” suggests a far lower immigration intake is in Australia’s best interest.
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In 2010, Flinders University released a report to the Department of Immigration and Citizenship (DIAC) examining the “Long-Term Physical Implications of Net Overseas Migration” (NOM). This report concluded that “higher levels of NOM impose greater adverse impacts on the quality of our natural and built environments” and that the “geographical concentration… within Sydney, Melbourne and Perth… substantially increases their environmental impact”. The report also found that “decreased urban water supply is a significant environmental constraint exacerbated by higher levels of NOM”. In particular, “modelling shows the vulnerability of Sydney, Melbourne, Brisbane and Perth to deficits in water supply“.
The Flinders University report also noted that Australia’s water resources could only cope with NOM of up to 50,000 people a year (versus 210,000 currently):
Only NOM levels of 50,000 pa or less result in Melbourne and Sydney maintaining a small surplus of net surface supply over demand on average out to 2050, assuming current climate conditions persist. Potential options to alleviate water stress at high NOM levels over the longer term may be hard to find.
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Also in 2010, the Australian Conservation Foundation (ACF) called for Australia’s population to be stabilised and nominated human population growth as a “key threatening process” to Australia’s biodiversity.
In 1994, when Australia’s population was just under 18 million, the Australian Academy of Science (AAS) convened a symposium on the future population of Australia. Its analysis was extended to Australia’s resources of water, minerals and arable land, and the interactions between present lifestyle and present environmental damage, and between future expectations and the costs of increasing population.
The AAS cautioned that “if our population reaches the high end of the feasible range (37 million), the quality of life of all Australians will be lowered by the degradation of water, soil, energy and biological resources” and concluded that “the quality of all aspects of our children’s lives will be maximised if the population of Australia by the mid-21st Century is kept to the low, stable end of the achievable range, i.e. to approximately 23 million”.
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Immigration does not solve population ageing:
Next, Liz Allen repeats the myth that we need mass immigration to offset an ageing population, and “we are getting to the point where we want to avoid the adverse consequences of having a lower proportion in the workforce”.
For more than a decade, the Productivity Commission (PC) has debunked the notion that immigration can overcome population ageing. For example:
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”.
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The reason is simple: it’s a Ponzi scheme. It requires ever more immigration, with the associated negative impacts on economic and social infrastructure, congestion, housing affordability, and the environment.
Of course, Dr Allen could also read Peter McDonald’s 1999 paper, where he explicitly noted:
“It is demographic nonsense to believe that immigration can help to keep our population young. No reasonable population policy can keep our population young”.
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Or Dr Allen could read the recent empirical study by Economists at MIT, which found that there is absolutely no relationship between population ageing 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.
Or Dr Allen could read the Reserve Bank of Australia’s recent Bulletin Article, which explicitly noted that while ageing of the workforce has tended to reduce labour supply, this has been mostly offset by increased labour force participation of women and older people.
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Everybody, except Liz Allen, knows that mass immigration pushes up house prices:
Next, Dr Allen claims that the “evidence” shows that immigration does not push up house prices:
“Pieces of research have shown that immigration does not – the net effect is that there is little to no effect of immigration intake on the housing market. That is, immigrants are not increasing your neighbourhood house pricing. That’s not the case”.
In fact, if we were to cut immigration in half tomorrow, the population would still continue to grow. There would still be demand…”
You read that right folks. Population growth apparently has absolutely no impact on house prices.
“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…
“NSW and Vic have overwhelmingly seen a much greater increase in population… with most of the population flowing into Sydney and Melbourne… The substantial increase in the population of the two largest states has fuelled increasing demand for housing…
From a political view the best way to improve housing affordability is to see growth stall for a number of years… The way to achieve this is to undertake a wide range of both demand and supply reforms… [One] way to slow demand in Sydney and Melbourne would be to consider reducing the level of migration to Australia.
…these reforms are vital because it is clear that after such a significant and sustained surge in dwelling values over recent years more needs to be done to temper the growth in the Sydney and Melbourne housing markets”.
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Do we even need to debate this point?
Mass immigration is causing dis-economies of scale:
Next, Liz Allen argues that “the pressure is lessened” on infrastructure by mass immigration because they “make things more viable”.
Obviously living in Canberra, Dr Allen hasn’t noticed the gridlock that has developed across Sydney and Melbourne as infrastructure has breached capacity. Nor has she noticed that infrastructure costs are rising as we try to retrofit Sydney and Melbourne – which are already built-out – with hideously complex and costly infrastructure to cope with population influx, thus requiring expensive tunneling, land buy-backs, water desalination, etc. These are classic dis-economies of scale.
Don’t take my word for it. Here’s the Productivity Commission’s (PC) view from its Migrant Intake Australia report:
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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.
…there will be additional costs for the community where environmental services that are currently ‘free’ have to be replaced with technological solutions…
..where assets are close to capacity, congestion imposes costs on all users. A larger population inevitably requires more investment in infrastructure, and who pays for this will depend on how this investment is funded (by users or by taxpayers). Physical constraints in major cities make the costs of expanding infrastructure more expensive, so even if a user-pays model is adopted, a higher population is very likely to impose a higher cost of living for people already residing in these major cities.
Similarly, in its latest Shifting the Dial: 5 year productivity review, the PC explicitly noted that infrastructure costs will inevitably balloon due to our cities’ rapidly growing populations:
Growing populations will place pressure on already strained transport systems… Yet available choices for new investments are constrained by the increasingly limited availability of unutilised land. Costs of new transport structures have risen accordingly, with new developments (for example WestConnex) requiring land reclamation, costly compensation arrangements, or otherwise more expensive alternatives (such as tunnels).
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Blind Freddy can see that there is little hope of achieving the level of investment required to sustain current levels of mass population growth. And even if we did, user costs would soar.
Queen of the strawman argument:
Finally, when challenged by William Bourke on her false ‘economies of scale’ argument, Liz Allen resorted to platitudes and strawman arguments:
“The idea that we cannot build and see a future is nonsense. We are Australians. We are smart. We’re innovative. We look to the future and we will make it work. Migrants are a key part of our future. We should not blame population for policy failures. The infrastructure and all of those things need to be considered, yes, but at the moment we have a two-speed population where we have Sydney and Melbourne growing fast. NT, TAS, SA – they are wanting to attract more people. We need to be smart and consider what we want to be…
If we want to hand the same wellbeing that we’ve enjoyed to our children, and our subsequent generations, we will rely on immigration”.
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First, nobody is calling for immigration to be stopped. Only for it to be normalised back towards the historical average from triple the historical average currently:
Second, the proof of the pudding is in the eating. We’ve had 15-years of hyper immigration and it has unambiguously crush-loaded living standards in the major cities. The definition of insanity is doing the same thing over and over again and expecting a different result.
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Third, “our children, and our subsequent generations” definitely won’t enjoy the same living standards if we continue with mass immigration. As our major cities balloon in size (see below chart), the best many can hope for is an expensive shoebox apartment, even worse congestion, and a degraded environment.
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.
