Three ‘obvious truths’ about Australia’s immigration
An economist claims there are “three obvious truths” Canberra refuses to accept about Australia’s immigration levels - and one controversial solution.
OPINION
There is distinct irony in Australian support and resistance to immigration.
Surveys consistently describe that support is stronger in younger cohorts and more resistant in older ones.
This is usually ascribed to social progressiveness in the young versus social conservatism in the elderly, but is this true?
Australia’s older populations are now dominated by freedom-loving Baby Boomers. These are hardly social troglodytes.
A better description is that older generations are graduates of the school of hard knocks, whereas younger ones, by definition, are not.
Thus, even Baby Boomers today realise that an unchecked political economy can do great harm to its children if allowed to, and migration is doing so by suppressing entry-level wages, pushing house prices beyond the reach of all but existing owners — as well as, in this cycle, adding extreme rental pain via inflation to the mix.
There is also environmental degradation and the crush-loading of all public services, including blown-out waiting times for health services, transport and policing.
This is the irony. The mass immigration economic model beloved by the Albanese government is tantamount to open war on the living standards of younger Australians, and parents dislike it more than the kids do.
Ruined living standards
It is very easy to point to various measures of falling living standards across all public services: Victoria’s crime problem, waiting times for emergency services, the decline of tertiary standards to name a few.
Let’s stick a few more pressing measures in private lives.
Real wage growth for young Australians has been pancaked throughout the mass immigration era.
Home ownership rates have been crushed over the past decades by rising prices. This is primarily financialisation, but immigration undoubtedly makes it worse at the margin.
And in this cycle, the true bete noire of Aussie youth living standards has been the rental shock delivered by an Albanese government that drove immigration levels to unprecedented levels while crowding out dwelling construction with Labor government infrastructure investment and failed energy policies.
This is a disaster for the young Australians who voted Albo in, both financially and mentally. As Maslow’s hierarchy of needs shows, if you’ve not got a dwelling to live in and income security, then your welfare pyramid looks more like a pile of rubble.
Why do they do it?
Why does Canberra refuse to acknowledge these obvious truths?
There are many reasons, but the top three are political, not national interest.
First, more warm-bodied Australians means higher income taxes. This satisfies the political need to deliver near-balanced budgets. There is nothing essential about this, and it could be done much more constructively by other means, such as cutting spending on bureaucrats and properly taxing mining, but imposing the burden on youth is a free kick versus blowback vested-interest campaigns that attack the government.
Second, it delivers headline economic growth. That it smashes GDP per capita can be brushed under the carpet, and the government of the day can crow about its growth credentials.
Third, the pollies are neck-deep in property investments themselves and refuse to do anything that might jeopardise their value.
The counterfactual
But would cutting immigration crash dwelling prices? No. It would take pressure off them at the margin.
What it would do is crash rents, which would take a lot of pressure off inflation.
In turn, this would lower interest rates, thereby supporting asset prices.
It would also strengthen wages, notably at the entry level, where youth predominates. Contrary to popular belief, Aussie immigration is mostly unskilled, and entry-level jobs are awash with surplus labour.
Lower immigration would obviously lift productivity considerably as well. Since the advent of the mass immigration economy pre-GFC, and especially so afterwards, Australia’s failure to match investment with the scale of the people intake has led to severe capital shallowing.
This means there is far less technology per person than there used to be, and productivity plus business income generation has slowed accordingly.
If this were reversed, it would unshackle national income growth.
The AI threat
Moreover, the emergence of artificial intelligence as a business application is threatening to turn this slow-moving economic war on youth into an atomic bomb dropped on a child care centre.
AI is, for the time being, at least, a junior-worker-displacement technology.
In the US, recent graduate unemployment is through the roof, and a similar trend is emerging in Australia.
Interns, junior researchers, checkout staff, administrative assistants, and dogs’ bodies – all of those youth employment-intensive features of the service sectors that predominate in the Australian economy – are being replaced by AI before our eyes.
This threatens to break the lower rungs of the employment ladder on its own.
It is time we ask if it is wise to make Australian youth compete with hundreds of thousands of Untouchables for the remaining positions.
Immigration freeze
There is no need to end immigration in some grand conflagration that sends the sensitive scurrying for comparisons with the White Australia Policy.
Those days are long gone. Australia is already multicultural.
What we need is a pragmatic three-to-five-year immigration freeze that enables us to restructure the economy away from today’s war on youth and towards something more dynamic, equitable, green, and income-generating.
To show ourselves we can do it, which, of course, we can, and restore the economy to more traditional drivers of growth that enhance, not degrade, per capita welfare.
We have nothing to lose. Albo’s immigration-led economy is a standing disaster, marked by four years of crashing living standards.
Time to try something else.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geopolitics and economics portal. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
Originally published as Three ‘obvious truths’ about Australia’s immigration
