Oz Blog News Commentary

Abbott on immigration

February 21, 2018 - 09:32 -- Admin

Not everything that Tony Abbott says is nonsense.  A fair bit of his verbal output is suspect but his views on immigration make sense. The claims of his critics often do not.  Particularly when they are related to unwarranted claims of an anti-multicultural bias.

Abbott wants a substantial cut in the immigration intake from 190,000 to 110,000.  The reasons are to limit pressure on house prices and to encourage wage growth.  Both of these claims are correct. Immigrants comprise at least half of housing demands in Australia  because they comprise more than half of population growth. Moreover, typically immigrants enter Australia with the need for somewhere to live and without any existing dwelling here. Restricting immigration will reduce demand pressures on house prices.  Likewise net additions to the workforce are more than half related to immigration for the same reasons.  Unless you believe the cloud-0cuckoo view that wages are unrelated to the supply of labour, pouring huge numbers of immigrants into Australia will limit wage growth.  The current immigration intake is 190,000 annually which is at close to record levels – almost double the level of the Howard years.

ANU academic Liz Allen is quoted as saying”evidence shows that the optimal rate of immigration is 160,000 to 210,000 per year”. What evidence?  I’d like to see it.  Having worked in the area of population economics for 30 years I know of no practical way of determining “the” optimal population and that is what is implied here.  The issue is not whether these additional people provide tax benefits and “much needed” skills but whether we are better off net having such a high rate of population growth.

Allen claims that people in Melbourne and Sydney want an expanded population.  Where is the evidence for that claim too.  Massively increased congestion over recent years and with each of these cities destined to be mega-cities by 2050 are an unattractive prospect to many.  Allen further claims that infrastructure funding has failed not the immigration program.  But vthis infrastructure funding is a consequence of (a cost of) pursuing high rates of population growth.  Moreover it is paid for, in the main, by original residents of these cities not by the newcomers.  These infrastructure costs, that are in the order of tens of billions of dollars, are driven by the needs of cities exploding at their boundaries. They dominate any claims that Australians derive net benefits from immigration. dominate.

Claims that immigrants increase the size of the economy are true but irrelevant piffle.  The immigrants want to come here so they can be judged better off. The relevant criterion for accepting such high rates of immigration is whether preexisting people derive advantage or not.  To answer this note that immigrants do increase the value of the economy but some of that increase is paid to them as wages as factor returns. The residual – higher profits and other returns to original resource owners must exceed the value of the increased congestion costs that are imposed and the massive infrastructure bills that are being expended by state governments to accommodate a vastly bigger population.  These infrastructure bills relate not only to roads and public transport systems but also to the exploding costs of water provision – there are now hugely expensive desalination plants in every state capital city – and exploding energy costs. The net return to the preexisting residents of our community is plausibly negative.

We are losing as a community by pursuing such mindless, “endless expansion”, population targets.  Cities that have been ranked as among the world’s most liveable are already becoming much less so.  Tony Abbott is right. We should substantially restrict our immigration intake.