Corrupted Treasury wallows in ‘Big Australia’ Budget lies

By Leith van Onselen

If you want a textbook example of how the Australian Treasury has become corrupted, look no further than its analysis on the impact of immigration on the Federal Budget, as reported over the weekend in Fairfax [my emphasis]:

There were 162,000 permanent visas approved in the 12 months ended June 30, a cut from 190,000 the previous year…

Between April 2017 and April 2018 Treasury produced two reports to Cabinet on the financial impact of a cut to immigration…

Those documents will not be released under a freedom of information request, but Fairfax has obtained a Treasury briefing showing how it calculates the contribution of individual migrants to government revenue.

The briefing revealed Treasury looks at the contribution of migrants at an individual level, including the “personal incomes of migrants, a Department of Home Affairs survey and de-identified tax return data provided by the Australian Taxation Office”.

The cut to 162,000 last financial year takes us back to pre-2011 levels. It is understood the modelling used in the 2011-2012 budget papers remains valid; this showed an increase in the migration program from 168,700 to 185,000 would have delivered a $569 million a year boost in tax by 2014-15, up from $214 million in 2012-13 and $382 million in 2013-14.

“In evaluating this, we differentiate between the different characteristics of migrants from the skilled, family and humanitarian migration streams, and interactions between the permanent program and temporary residency visas,” the briefing said…

When the issue was debated in Cabinet, Treasurer Scott Morrison slammed a push from former prime minister Tony Abbott to cut the immigration intake to 110,000, warning it risked Australia’s future economic prosperity and would “cut off your nose to spite your face”.

So according to the corrupted Treasury, a 16,300 increase in migrants (from 168,700 to 185,000) was estimated to contribute an additional $569 million per year in tax revenue to the Federal Budget, equating to $34,900 per extra immigrant.

However, to pay $34,900 in income tax, the average migrant would need to earn roughly $125,000 per year, which is way above what migrants actually earned, according to the ABS:

The median Employee income of migrant taxpayers in 2013-14 was $48,400. This represented a 1.0% increase in real terms on median Employee income in 2012-13…

While the average income will obviously be above the median, it will be nowhere near the level required to meet the Treasury’s claimed revenue impact. Heck, even “skilled” migrants’ median income was only $52,892 in 2013-14.

More broadly, a holistic analysis of budgetary impacts needs to also take into consideration the impact on state budgets, which carry the cost of infrastructure and services to support population growth (think roads, public transport, schools and hospitals).

Analysis by the Grattan Institute in 2014 showed that “unprecedented infrastructure spending by states and territories” since the escalation of population growth from 2004 is “largely responsible for a $106 billion decline in their finances since 2006“, and that “after a threefold increase in capital spending over the last 10 years, states are paying 3 per cent more of their revenues in interest and depreciation”.

Separately, Grattan executive director, John Daley, recently noted that “state governments were struggling to deal with rapid population growth in their major cities and the quality of life of residents – represented by the rapid growth in house prices in recent decades – was suffering”.

Further, a holistic analysis should also take into consideration the costs of mass immigration on household budgets, such as from increased user charges (e.g. toll roads, water desalination, etc). According to the Productivity Commission’s (PC) recent Migrant Intake Australia report:

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.

Of course, you could do what Australia’s governments have done and ‘save’ money by simply refusing to undertake the required infrastructure investment – the end result of which has been massive infrastructure bottlenecks, congestion, and eroded living standards.

All of which reminds us again of the sage words by The Australia Institute’s chief economist, Richard Denniss:

“Australia is one of the fastest growing countries in the developed world and our infrastructure isn’t keeping up. It isn’t keeping up now and hasn’t kept up for the last 10 years, and it’s not budgeted to keep up in the next 10…

Per person we’ve got less access to transport, per person the reason the queues in the hospital keeps getting longer is because we are not building hospitals as fast as we are growing our population… Per person, the amount of infrastructure is declining. Per person, the amount of spending on health is declining…

Population growth costs a lot… If you double the number of citizens then you double the number of teachers and double the number of nurses. It’s pretty simple math. But of course, you don’t have to double them if you gradually plan to lower the number of services. If you are happy for us to gradually lower the number of services in our health system, our aged system, if you are happy for congestion to gradually get worse, if you are happy for the amount of green space per person to decline, then you can do what we do”.

The corrupted Australian Treasury has locked itself into declining living standards just so the Federal Budget can print some nice optics and the Government can claim to be a good economic and fiscal manager.

The wellbeing of the ordinary Australian is a distant priority.

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