Let's raise the standard on migration and stimulus

WE"VE never had it so good, but our politicians are letting us down.

WE"VE never had it so good, but our politicians are letting us down.

NIALL Ferguson is probably the world's leading economic historian, and not just in the scholarly environment (he is a professor at Harvard University). He is renowned for his ability to make his area of expertise understandable to the majority of people who haven't studied economics.

His tenth, and best-selling, book, The Ascent of Money, charts the history of currencies the world over, as well as explaining how the Western world became so dependent on credit. It was also turned into a television series.

This week, Ferguson visited Australia to speak at the Centre for Independent Studies, and weighed into the debt and deficits debate and the immigration debate, twin issues that will help decide the federal election.

Ferguson told his audience: "You really never had it so good." And while he was critical of both government and opposition policy across a range of areas, his message was that Australians shouldn't get caught up in negatives at the expense of the opportunities we as a nation have.

The "never had it so good" line is reminiscent of something similar John Howard had to say when he was in government. It caused Howard some political bother, and was used in Labor attack ads when the Work Choices election rolled around in 2007.

But Ferguson isn't a politician, doesn't need to curry favour with large slabs of the electorate who are doing it tough, and can therefore speak honestly without worrying about offending people weighed down by cost-of-living pressures.

What matters most in the context of this election campaign was Ferguson's attacks on the nature of the government's stimulus spending during the global financial crisis, and the way both parties are now engaging in a lowbrow debate on immigration.

With just over three weeks left, these are twin issues of significance in the campaign.

Ferguson well knows the depth of the economic problems in Europe and the US two years ago, and how problematic their economies remain today.

He was a cautious critic of stimulus spending offshore, which wasn't affordable, and was only going to drive some national economies further into debt.

He also knows that Australia went into the global crisis with a much sounder balance sheet than most of Europe and the US, but that's no excuse for what he termed "an overreaction" of stimulus spending when the crisis hit.

The strength of Australia's economic fundamentals, and the fact we had room to move on interest rates, are the reasons why the size of the stimulus spending was an overreaction, and that's Coalition finance spokesman Andrew Robb's argument now.

It is a well thought through case to prosecute. Australia could have cut interest rates much more to prop up economic activity without relying on debt. That would have had two consequences, both favourable -- lower interest rates and less accumulated debt.

Labor argues the third consequence would have been a less desirable higher unemployment rate. Maybe, but it is unlikely it would have been as high as it claims, and when you consider the jobs saved verses the debt racked up, the monetary rather than the fiscal approach might have been better in hindsight.

This brings us to the problem with the Coalition's political attack on Labor, or more accurately, what makes it superficial and inaccurate. It focuses on the size of the debt, not the interest rate rises.

It is not a binary political play, of course. Joe Hockey and Robb attack both. But the focus should be the former, not the latter.

As Ferguson well knows, it is an attack that is overkill by global standards. Australia has very low debt, even if the figures being bandied around don't sound that way. A debt build-up of $100 million daily sounds terrible, and will no doubt alarm the punters. But as a percentage of our GDP, Australia's debt is much lower than that of most countries, and it is more than manageable.

That's the reason both parties say they can get the budget back into surplus in only three years, after which they can start paying off accumulated debt.

If our politicians decided to have a serious, well-informed debate about debt, deficits and stimulus spending, we would all be better for it. There are arguments with merit on both sides, which dare I say would lead to a stimulating discussion.

The other policy area where we're seeing a race to the bottom in quality of discussion is the immigration debate, or more broadly put, the population debate.

Julia Gillard doesn't support a big Australia, but that's as much as we know about her position. Tony Abbott wants a cap on immigration, but the cap he proposes would be at a rate that would not change current projections anyway, and the idea of a cap is almost universally panned by demographers. It's not done anywhere else in the world.

The business community wants migration levels to be tied to labour force needs to facilitate economic growth. But one of its best-known spokesmen, Peter Anderson, sounds more like a politician than a business representative, so inaccurate is his rhetoric.

Responding to Abbott's immigration cap on Monday, he said: "The idea that we should somehow put up the country-full sign is a very negative idea." Yes it is, but no one is actually saying that.

Abbott's cap idea is stupid and impractical. Controlling migration levels with a cap won't work because of the high number of temporary migrants that come each year, coupled with expats who can return home whenever they choose, distorting the figures. That's what has happened over the past two years because of the global crisis.

A target is fair enough, but not a rigid cap. But Abbott certainly isn't putting up a country-full sign, and neither is Gillard. Abbott's cap is 170,000 a year, enough to get us very close to 36 million by 2050.

If the business community wants to elevate the migration debate, as it surely needs to, it shouldn't retreat into political-speak. Otherwise the politicians' lowbrow commentary on Australia's future challenges might become contagious.