For a bigger pie, we’ll need to beef up immigration

Treasurer Jim Chalmers. Picture: NCA NewsWire / Gary Ramage

Talk within left circles about repealing the stage three income tax cuts of the previous government will reach fever pitch as Jim Chalmers contemplates his budget we have to have.

The Treasurer knows as a student of politics and one who did his PhD on Paul Keating’s parliamentary speeches that the history of “LAW tax cuts” means any deferment of the stage three tax cuts would be like gripping the third rail with both hands.

Australians don’t take kindly to money they’ve been promised not being delivered. Sure, most people won’t receive a single additional dollar of tax relief when the package passes for the better paid, but it is their aspiration to one day earn enough to be in that tax bracket that really counts.

It’s not just from the whining social services lobby groups and Bernie Sanders acolytes such as Wayne Swan that this wealth envy emanates. Treasury is known to favour a repeal also. As does the Reserve Bank. Other economists are concerned about expanding private consumption demand when inflation is prospectively going to run wild. The Australian Taxation Office also is opposed. It sees tax cuts as giving away its money.

The conundrum is just one of many examples where the Albanese government is painted into a political corner by the small-target, do-nothing, say-nothing Albanese opposition. Rather than have the courage to say no and stand for something, it rolled over and said yes to everything.

Those ancient enough like me to remember Yes Minister when it was freshly broadcast will recall the phenomenon of ministers stridently having to oppose policies advanced by their previous shadow incarnations. Sir Humphrey’s advice: “Well, minister, that was then, this is now.”

But in this febrile political environment, with the government trading with low levels of political capital, it would be borderline suicidal to repudiate stage three. Albanese also will want to keep in good with his new brains trust, the teals. Teals will squeal if their well-heeled, Tesla-driving, private-schooling, weekender-at-Sorrento voters can’t factor in business-class return airfares to the snow with the help of their stage three tax cuts.

Albo runs the risk of pursuing the chimera of passing popularity while being unable to make the hard calls to give the budget some much-needed firepower.

No doubt Chalmers will listen to his Treasury secretary, Steven Kennedy, about just how bad it would be to put more discretionary spending fuel on the inflationary bonfire. His experienced chief of staff, Claudia Crawford, will counsel him that voters will remember only a promise broken when it comes his time to run for prime minister.

Labor also promised no cuts to programs. Labor knows the middle-class welfare its voters survive on needs big cuts. The Albanese opposition pledged to cut only “wastes and rorts” and while these are in the eye of the beholder, sharpening the axe in any meaningful is politically nightmarish.

So, you’ve got a labour market crisis from lack of supply and potential wage breakouts from unions; a cost-of-living crisis and inflation; and an annual interest bill on your trillion-dollar debt that could pay for the National Disability Insurance Scheme twice over but for which not one voter will get a benefit.

The answer to all this is obvious but cannot speak its name: a huge increase in immigration.

The government started the conversation last weekend by talking up “a return to pre-Covid” immigration levels, but it won’t be enough to wobble the economic dial. We need a sustained immigration plan that rivals the post-World War II pattern of European settlement into Australia. This time we should embrace migrants from across the world.

If we aren’t prepared to reapportion how the pie is cut then the only solution is to grow a bigger pie. This isn’t foreign to Albanese as he supported his predecessor Kevin Rudd’s Big Australia policy. In 2009 Rudd proposed that immigration should be used to grow the nation by an additional 14 million people by 2050 over and above the natural growth projection of 36 million by 2050.

Julia Gillard and Swan used this to undermine Rudd, appealing to xenophobia in the Labor caucus. Gillard formally repudiated the idea as unsustainable.

It was good to see Rudd return last year to the National Press Club and again push for a big Australia, this time to support not only an increased tax base but also as part of the solution for increasing the size of our military to defend against the rise of China.

So, in the 28 years left to get to 50 million from our starting position of 25.6 million we need a “super size me” immigration intake. We need to grow in net terms by almost a million new citizens a year. Sure, people will live longer, but as Australians haven’t taken up Peter Costello’s “have one for the nation” baby plan then we can only look to overseas to grow our nation meaningfully.

But this will require national leadership to push the agenda. If it’s not going to be higher taxes or deeper spending cuts then it has to be much greater numbers of migrants if we are to grow our budget bottom line.