Features Australia

Sloan agrees with Garnaut! Hold the presses!

We need fewer migrants, not more

20 March 2021

9:00 AM

20 March 2021

9:00 AM

Most people would understand the first law of economics: for every economist, there exists an equal and opposite economist.

Take Professor Ross Garnaut and me. He thinks a universal basic income is a good idea. I think it’s insane. He thinks we should have a carbon tax. I think it would destroy jobs and be pointless.

He thinks we should expand monetary and fiscal policy until we reach full employment. I think that reaching full employment can only be achieved by removing employment-hostile rules and regulations.

By the way, the long-run costs of the Garnaut strategy are immense, including the debt burden imposed on future generations.

But in what is a turn-up for the books, there is an issue on which Garnaut and I agree. We both think that the federal government’s irresponsible immigration policy implemented for over a decade and a half has had a number of adverse effects, including contributing to low wages growth.

Garnaut notes that from the early 2000s, the Howard government decided to sharply increase the rate of immigration. In 2000-01, the permanent migrant intake was set at 80,000. By 2007-08, the last year of the Howard government, the intake had jumped to 159,000 – a near doubling.

Further increases occurred under the Rudd/Gillard/Rudd government, with the intake set at 190,000. It took the Coalition government until 2018-19 to reduce the annual intake to 160,000.

These days, however, the permanent migrant intake is only part of the story, with temporary migrants making very substantial contributions to population growth. These broader trends are captured in the Net Overseas Migration figures which are based on migrants entering the country for at least 16 months minus migrants who leave.

At the turn of the century, the NOM figure averaged around 100,000 per year. From the middle of the 2000s, the figure was closer to 200,000 to 250,000 per year, with NOM contributing some two-thirds of population growth.

The largest group of temporary migrants, by far, was international students, followed by working holiday makers. The much-maligned 457 visa holders – temporary skilled workers – were relatively few in number. In 2018, for instance, skilled workers made up only five per cent of all temporary visa holders.

It’s important to note here that international students have (constrained) work rights while they reside in Australia. They are able to work 20 hours per week during semester time, while there are no restrictions at other times.

Aside from the obvious implications of the ramped-up migration program on the size of our population, which has grown by 35 per cent since 2000 to around 25.6 million, the composition of the migrant intake has shifted away from skilled to unskilled workers – a point Garnaut makes.

‘The overall effect was to integrate much of the Australian labour market into a global labour market for the first time’. That’s the equivalent of saying we have imported cheap labour and this has harmed local workers who compete with imported workers.

‘Increased immigration contributed to total GDP growth, but detracted from the living standards of many Australian working families’. Gosh, I could have written that sentence myself.

He even talks about the social and cultural consequences, as well as the economic ones, of the dramatic rise in temporary migration. ‘For the first time, large numbers of migrants were not on a path to citizenship. The temporary migrants had less knowledge of their rights in the labour market and were vulnerable to exploitation. Breaches of labour laws on wages and other conditions became common’. That’s right: allowing hundreds of thousands of temporary migrants with work rights into the country has led to problems. Who would have thought?

Of course, COVID-19 has shredded the migrant program, both permanent and temporary, with a negative NOM for 2020 being a likely outcome. On one estimate, Australia’s population could end up being four per cent smaller as a result of the pandemic and closed international borders.

If public opinion surveys are anything to go by – and they are in this case because of the sheer consistency of the public’s increasing antipathy towards large migrant intakes – the almost complete pause in immigration will have been welcomed by most people. This is particularly the case for Melburnians and Sydneysiders who have borne the brunt of the explosion in international students.

Garnaut’s solution is ‘to think through the scale and composition of immigration that will contribute most to broadly shared goals.’ He wants a smaller program focused more strongly on skills, nominating a migrant intake that would contribute 0.5 per cent to population growth rather than the closer to 1 per cent in the pre-Covid era. (Natural increase adds around 0.5 per cent.)

While I might quibble with those precise numbers, Garnaut’s proposal is a step in the right direction. But here’s the depressing thing: the federal government, including the Prime Minister and Treasurer, is taking no notice of the sound advice of the Garnaut/Sloan ‘team’.

Constantly pressured by the property industry, the universities and other educational providers, the Big Australia advocates within the bureaucracy (both federal and state) and various other lobby groups, the government has made it clear that its intention is to resume the immigration tidal wave as soon as possible.

Rather than accept that training our own is a more principled policy alternative, Scott Morrison has flagged the resumption of high levels of temporary migration as soon as possible.

‘Building the scale, capacity and skills of our workforce is the single greatest economic challenge we face,’ he declared at a recent Australian Financial Review business summit.

‘We must re-look at the role that temporary visa holders play in meeting our economy’s workforce requirements, where Australians do not fill these jobs. Rather than taking Australian’s jobs, we need to instead appreciate how filling critical workforce shortages with temporary visa holders can actually create jobs elsewhere in the economy and, in particular, sustain growth and services in our regional economies.’

Now presumably he was fed this guff by the bureaucrats in his own department and Treasury. Of course, short of building rabbit fences, there is no way of keeping temporary migrants in regions. What he should have said is that fewer migrants will mean lower GDP growth but – as Garnaut rightly points out, ‘it might improve the living standards of most Australians.’ Now that could really be a vote winner.

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