Shoddy economics behind the debate on migration
The fact that we have very few illegal migrants lowers the temperature here. But our high rate of regular immigration since Covid is clearly starting to affect the political debate.
The real import of the recent anti-immigration protests held here was not the unpleasant, nay despicable, behaviour of certain activist groups but the attendance of ordinary folk who simply favour much lower annual rates of immigration. We know this from repeated surveys that indicate a growing majority of Australians are keen to see smaller migrant intakes.
The position of the Albanese government on immigration, including the appropriate annual intake, is confused.
Philosophically, some members of the government essentially favour an open-borders approach and welcome everyone who can get their hands on a visa. They are in the Big Australia camp.
Other members are more circumspect. Rather, they accept that annual migrant intakes should not be so large as to put unwanted pressure on housing, infrastructure, services and social cohesion.
Having said this, there are operational difficulties in guaranteeing sustainable intakes because of the predominance of temporary migrants.
Another key feature is the pressure that the government is put under by various lobby groups to maximise the migrant intake so their commercial interests can be met. The universities have become a powerful force pushing for higher international student numbers. They fiercely resist any caps on the numbers and are not impressed by any other conditions or restrictions. Property developers and some employer groups also favour high rates of immigration. Some ethnic groups lobby for particular visa conditions – parent visas is a case in point.
While state governments are consulted by the federal government on immigration matters, including the setting of the annual permanent numbers and the composition, these state governments are also subject to the same pressures from the vested interest groups. Indeed, the force of these pressures can be stronger at the sub-national level.
There is a great deal of shoddy economics written about the immigration figures and the economic impact of net arrivals.
Were a first-year economics student to serve up these falsehoods, they would fail. But open-border sympathisers/Big Australia advocates attempt to manipulate the numbers to push the line that there is nothing to see and there is no reason to reduce the migrant intake.
These canards include the following:
• Recent high figures of net overseas migration (long-term arrivals minus long-term departures) are merely a catchup from the pause caused by Covid.
• The overall trend numbers are no different from the ones that the Morrison Coalition government had predicted.
• The problems in the housing market have nothing to do with the surge in the number of migrants.
• Any additional pressures on infrastructure and services are the result of poor planning, not because of the migrant intake.
• Any supposed loss of social cohesion is essentially the fault of those born in Australia and their intolerance to different cultures.
Consider the first two points. What is being argued here is that surging net migration after the Covid restrictions were lifted – NOM was almost one million between July 2022 and June 2024 – was to be expected and was never any real concern. In the decade up to Covid, the annual NOM had averaged about 200,000.
It’s a bit like saying the road was closed for a while and so no cars could get through. But with the road now opened, it was fine for the cars to massively exceed the speed limit.
The fact is that economists have always recognised the limitations of the absorptive capacity of the economy to accommodate new migrants. It was something boosters simply decided to forget.
As for the cumulative figures being little different from the Morrison government’s forecasts, these speculative projections were never set in stone and were subject to considerable debate. Note here that Scott Morrison, as treasurer and prime minister, always favoured large migrant intakes. Note also that these same commentators who make this point have nothing favourable to say about any other aspect of the policies of the Morrison government.
As for the howler that the surge in migrant numbers has not affected the housing market or house prices, this is another example of commentators simply forgetting their lectures on supply and demand.
Peter Tulip of the Centre for Independent Studies maintains that cutting immigration would be “a distraction from dealing with clear dysfunction in our housing policy, that we have a system that makes supply unresponsive to demand”.
This is completely absurd. Even if supply is responsive to demand, there are limits to this responsiveness within certain timeframes.
With all of Tulip’s preferred reforms in place – rezoning for high-density housing, rapid approvals and the like – there is simply no way that new home construction could fully respond to such a rapid increase in the population.
The massive uptick in demand caused by migration has clearly been a factor and no sensible economist would deny this.
Questioning the integrity of those who point this out is shameful. “Housing is raised by many people who have unattractive values they’re wanting to hide,” according to Tulip.
The reality is that no one is arguing for all migrant arrivals to cease. Rather, people are begging to see the net numbers much lower than the past several years.
There is also a strong case for ensuring that skilled migrants really possess relevant skills rather than simply ticking arbitrary boxes devised by bureaucrats. There are far too may low-skilled temporary migrants staying in the country for lengthy periods.
As for the recent kerfuffle with the Australian Bureau of Statistics rebuking certain commentators about what the agency regards as the misuse of certain migration statistics, it’s easy to infer that the topic has become extremely politically sensitive.
What seems likely is that the government’s own NOM targets of 335,000 this financial year and 260,000 in 2026-27 are to be exceeded. And the government knows it. It just doesn’t want anyone else to know.
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The topic of immigration, particularly illegal entry, is politically red-hot in many countries around the world, including in Britain, France, Germany and other European countries. There is also no doubt that the massive numbers of illegal migrants crossing the southern border of the US was an important factor in the electoral victory of Donald Trump.