Professor Gary Banks – the long-time former chief of the Productivity Commission (PC) – has shredded Treasury’s Intergenerational Report (IGR), claiming that the case to reboot Australia’s mass immigration program post COVID does not stack up economically or socially. Instead Banks recommends a level of net overseas migration (NOM) of only 90,000 annually:
Australia’s relatively high rate of population growth – among the highest in the OECD – has been a key driver of the growth in aggregate GDP. Unusually for an OECD country… it has been due to historically high net immigration, accounting for two-thirds of overall population growth, before COVID brought things to a halt.
Treasury’s budget forecasts envisage net immigration getting back to its previous annual peak of 235,000 by 2025… One has to question whether, federal budget repair aside, attempts to revive immigration to the extent forecast would be sensible from a national interest perspective. While Treasury is perhaps understandably bullish, the Productivity Commission has provided a more nuanced assessment. This suggests that, under realistic assumptions, immigration does little for either participation or productivity nationally in the long term, with income gains in per capita terms small and largely skewed to migrants themselves.
Moreover, while highly skilled migrants are good for the economy, and sectors like mining in particular, and should be encouraged, the average skill level for the intake as a whole in recent years has not been high.
When externalities such as congestion and housing affordability are taken into account, I’d suggest that the optimal level of net immigration for Australia could be closer to Treasury’s forecast in the first IGR of 90 000 than the latest one. Where it ends up is unclear. But what is clear is that immigration policy is too important to be devised primarily on fiscal grounds or in relative seclusion.
Dr Judith Sloan, who was the Commissioner in charge of the Productivity Commission’s 2006 review into the Economic Impacts of Migration and Population Growth, has also demolished the IGR’s ageing alarmism in The Australian:
- “Immigration only slightly delays ageing, it doesn’t eliminate it. After all, migrants age too and the current bulge of retirees is, in part, related to the large migrant intakes of the 1950s and ’60s”.
- “There are plenty of countries with populations older than ours and that are ageing at a faster pace, and they manage well and their economies prosper”.
- “The fact people will live longer is surely a good thing… Public finances should easily accommodate a doubling of [over 85s], particularly if the economy grows strongly”.
- “Children will [also] make up a lower proportion of the population, with those aged 0 to 14 falling from about 19 per cent of the population to between 16 and 18 per cent. Children are also heavy drawers on the public purse – think childcare and schooling”.
- The costs of ageing from lower immigration are “offset by the reduced need for infrastructure and housing investment to support a growing population”
- “Contracting workforces [also] create stronger incentives for businesses to automate, while driving up real wages”.
- “Lower population growth is associated with lower emissions growth, all other things being equal. This means countries will find it easier to meet their agreed targets if population growth is lower”.
- “Given a choice between a gracefully ageing society and rapid population growth boosted by large migrant intakes, many Australians may opt for the former. Politicians may find it worthwhile presenting the alternatives”.
The concept of cost-benefit analysis does not exist at the Australian Treasury.
Treasury never takes account of the costs of high immigration – either financial or non-financial – since these are borne primarily by the states and residents at large.
Instead, the immigration system is all about numbers – the ‘Treasury numbers’ needed to sustain Australia’s headline rate of economic growth and the Commonwealth’s projected tax revenues.
Yet anybody with half a brain knows that adding a projected 13.1 million people to Australia’s population over the next 40 years – equivalent to adding another Sydney, Melbourne and Brisbane – will destroy living standards. The prior 15 years of mass immigration is all the empirical evidence one needs.
