Tony Abbott’s economic argument against immigration is flawed
First, when it comes to the impact of immigration on wages, the relationship is not as straight forward as Abbott suggests. By also bringing new consumers into the economy, immigration also has the effect of boosting demand for labour, so the net impact on wages is more complicated.
Evidence is mixed, but surveys tend to show only a small impact from immigration on the wages of local labour.
In the main, Abbott is correct to say that increasing the supply of something tends to decrease its price.
But he has missed a key caveat – a crucial phrase adored by economists the world over: “ceteris paribus“, or, “all other things being equal”.
In truth, all other things are rarely equal when it comes to analysing the economy.
Immigration is just one variable in an incredibly complex economy, in which demand and supply factors play equally important roles.
Abbott is right that more rapid population growth boosts demand for housing. But the story is far from over at that point. Governments can and do release more land for housing and local governments rezone land to boost supply.
To focus only on the demand side of a problem and not the supply is a very odd approach to applying economics indeed.
Ultimately, a country’s level of immigration is a matter for the government to decide. The economic cycle drives businesses’ desire to import new workers. But it is always up to government to decide the rules around working visas, family reunions and the annual humanitarian intake.
In any given year, far more people would like to migrate to Australia than we allow. It then becomes a moral question, as to whose needs should be prioritised: those of Australians, or those of others looking to live here.
Personal opinions will differ on the relative weight that should be given to the needs of Australians versus foreigners –that is why the issues remains such a political hot potato.
But, for my part, I have never placed the hopes and dreams of Australians so far above those of foreigners that their needs become unimportant in the debate. I support a generous immigration intake because it lifts the welfare of numerous potential migrants, without necessarily harming the welfare of existing residents.
Illustration: Jim Pavlidis
Of course, there is another important caveat there too. It is entirely possible for immigration to have the effects Abbott describes –of increasing congestion and house prices – if governments do leave everything else equal.
If governments fail to properly plan for the infrastructure needs – roads, railways, houses, schools and hospitals – of the growing population, then strains will inevitably arise.
These stresses have been more pronounced in our major capital cities thanks to an economic trend towards city living.
According to a report released last Friday by Infrastructure Australia, the proportion of Australians living in our four biggest cities is set to rise from 58 per cent to 64 per cent in the coming 30 years. These cities contribute more than 60 per cent of our economic output.
Growing populations do create stresses and strains, but growing cities are also engines of economic growth, not to mention melting pots to create rich and vibrant lifestyles.
As Infrastructure Australia puts it: “A growing population is an exciting opportunity to increase our national economic prosperity and liveability. The potential benefits are immense.”
“If we fail to effectively anticipate and respond to growth, the likely results will be declining economic productivity, increasing environmental pressures and a marked reduction in each city’s quality of life.”
Improved planning processes, better community consultation, more public transport and better maintenance of existing infrastructure are key, and entirely sensible, recommendations of the report.
The truth is, even if the government shuts the borders tomorrow, the strains of a growing population would still arise.
They say there’s one born every minute. And in Australia, that’s almost true. There’s one born every 1 minute and 44 seconds, according to the population clock on the Australian Bureau of Statistic’s website.
That makes for 831 births a day. Offset by only 439 deaths a day. And every day brings a net intake of 617 migrants to our shores. That means the population grows by about 1005 extra people a day.
At this rate, Australia will smash the 25 million people mark sometime in the second half of this year.
Without a program of mass sterilisation, euthanasia or a massive crackdown on migration, there’s no avoiding that.
The answer to a growing population is not to close the door, as Abbott and his supporters would suggest, but to start renovating the house.
Jessica Irvine is a senior economics writer for Fairfax Media.
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