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There is increasing debate about appropriate goals for Australia's future population growth with a rhetorical contest developing in 2010 between advocates of creating a 'big' Australia through high rates of immigration and of 'sustainable' (ie modest) population growth.
This document briefly suggests the probable advantages and disadvantages of a 'big' Australia through maintaining rapid migration, and some of the complexities involved.
In particular it suggests that there seem to be undiscussed issues in relation to pressure to sustain high rates of migration on economic grounds, because:
|'Big Australia' Issues||'Big Australia' Issues
The concept of a 'Big Australia' was advanced by a former ALP Prime Minister (Kevin Rudd) and involved an increase in the population from 22m in 2010 to 36m in 2050 by maintaining migration rates well above traditional levels.
The federal Opposition rejected this idea on the basis of concerns about the stresses associated with rapid growth - and proposed reducing net overseas migration from about 300,000 pa to 170,000 pa ('No Vacancy', Courier Mail, 25/7/10).
Mr Rudd's ALP successor as Prime Minister (Julia Gillard) expressed a similar view - though another former ALP leader suggested that Ms Gillard's rejection of a 'big Australia' was merely designed to hold Western Sydney seats (given concern there about asylum seekers) as she had also suggested that the question was not about migration levels but rather about planning and policy (ie to ensure that growth occurs where the jobs are)  . Ms Gillard subsequently noted that migration rates were projected to decline significantly in any case because residency provisions related to student visas had been tightened up.
The advantages of a 'big' Australia would seem to include:
Providing more workers to meet labour shortages is often asserted to be an advantage of rapid migration, though this claim is anything but certain (see below).
The possible disadvantages of a (relatively) 'bigger' Australia would seem to include:
|Rapid Migration and Labour Shortages||
Does Rapid Migration Cause or Cure Labour Shortages?
Australia's economy has experienced a period of sustained fairly strong economic and employment growth since around 1990. Though there was some dislocation after 2008 as a result of the global financial crisis (GFC), this was less than suffered by most developed economies as a result of both:
Claims have frequently been made that rapid migration is essential to provide the workers (especially skilled workers) needed to support Australia's growth industries, though there is also a diversity of other views.
However, while specialised skills complicate the situation, rapid migration overall can not seriously be advocated as a solution to shortages of labour in Australia
Reasons for suggesting this are outlined in What is the net effect of immigration on labour supply and employment?. The latter was based on an attempt some years ago to estimate the effects of the large interstate migration flows on SE Queensland and on the effect of high rates of catch-up infrastructure spending.
Those rough and now dated estimates don't give a definitive answer, but do show the need for proper analysis before any claims are made about the effect of migration on the net availability of labour.
Even suggestions that younger workers are needed to replace the large numbers of baby boomers who are retiring may well be invalid - because, if (as is possible) migration generates demands for labour that are roughly equal to the numbers of workers in the migrant population, then no amount of migration will reduce the coming labour shortages associated with domestic demographic changes (eg the aging population).
The difficulties Australia's mining industry has had in obtaining the skilled labour required by a minerals boom undoubtedly have a relationship with migration, but this is been complicated because of the simultaneous boom in catch-up infrastructure spending by governments.
The economic case for increasing migration can't be that this will increase the net supply of labour. Rather migration is more likely to be economically significant through providing affluent customers for the 'migration industries' that have developed. The latter involve the resources devoted to (say) developing facilities (housing, shops, infrastructure etc) and providing services (retail, health, education, etc) to meet the additional needs of the accumulated population of migrants.
The overall growth of Australia's economy is more influenced by the growth of such industries than it is by export-focused resource industries (which directly and indirectly employ comparatively few people). This can be a mixed blessing, of course, because the positive impact of 'migration industries' on a region's economic growth can be reversed, in the event that an economic shock dislocates the migration flow - as may possible have befallen Queensland
|Strategic Significance of 'Migration Industries'||
Strategic Significance of Migration
'Migration industries' have been an important component of SE Queensland's economy since interstate migration accelerated 3 decades ago (apparently as a result of a sun-state phenomenon and reduced death duties). While immigration and the rising population changed the character of SE Queensland (ie made it both less provincial and more congested), strong immigration probably had a negligible or negative impact on the availability of labour to do anything other than build facilities for immigrants.
'Migration industries', with similar effects, have also arguably developed elsewhere in Australia as international migration escalated in recent years.
Such industries create feedbacks between an economies' growth and migration. Thus:
Moreover while rapid migration arguably creates job opportunities and stimulates economic growth, it does so while avoiding the need to genuinely develop a productive modern economy. The emphasis that governments have given to 'growth management', while neglecting economic development, has not been constructive (eg see SEQ 2001: A Plan for an Under-developed Economy).
Encouraging growth based on 'migration industries' (which, in effect, are based on selling Australian lifestyles to the world) can be seen as yet another symptom of the 'resource curse' that universally limits the economic potential of regions with rich natural assets (see below). As one observer correctly noted, one can't reduce migration without reducing economic growth. However achieving growth simply by increasing population does not necessarily boost welfare (as GDP / capita may in fact stagnate or decline even if total GDP grows strongly).
Australia's Continued Economic Under-development
Australia remains a poorly developed resource-dependent economy despite efforts in recent decades to correct the problem.
Furthermore while Australia's economic prospects remain highly dependent on exports of minerals and energy, official expectations of a sustained boom (based on industrial development and urbanisation in China and elsewhere) seem very likely to prove wrong. And if the 'wheels don't fall of the Chinese wagon', than Australia will be confronted with, and dependent on. a regional political and economic environment in Asia that Australian's have no way of either understanding or dealing with effectively (see Babes in the Asian Woods and
Australia's Vulnerable Economy
The global economy faces severe constraints because of the world's failure to date to address international financial imbalances (see Too hard for the G20?).
Simplistically it can be said that these imbalances arose from: (a) the dependence of East Asian economic models on domestic demand deficits because of their the lack of a true 'capitalistic' focus on profit; and (b) the easy money policies adopted elsewhere (especially in US) to sustain global growth despite demand deficits in East Asia (and elsewhere). No matter what cyclical recoveries are engineered by private or public initiative in countries whose current account deficits are essential to maintain growth because of the character of East Asian economic models, financial imbalances must eventually lead to a global economic dislocation.
More importantly for Australia (given current dependence on a minerals and energy export boom) China's 'Ponzi-like' economy is likely to be headed for trouble when these financial imbalances can no longer provide new positive cash flows for wasteful investment (see Headed for a Crash?).
In this potentially unstable international environment Australia has a particular vulnerability related to the need for (say) $50-60bn per annum in foreign capital investment to balance similar current account deficits. It has often been suggested (eg by Bank of International Settlements) that Australia faces the risk of a currency crisis because of: (a) this dependence on foreign capital; (b) the fact that this has mainly been attracted by Australian banks for investment in property; and (c) this has created what some observers believe is a 'bubble' in housing prices (see Maintaining Capital Inflow in Defending Australia from the Global Financial Crisis).
If this 'bubble' were to deflate it might prove difficult to maintain capital inflow into Australia in the face of external credit constraints, and a situation like that in the 1890s might recur when constraints on inflow of capital forced banks to accelerate the decline in property values (by withdrawing investment) and ultimately a real estate crash resulted in numerous bank failures.
Clearly maintaining strong migration rates aids in maintaining housing prices - even if this is at the cost of making housing unaffordable for many.
|Towards Effective Management||
Towards Effective Management of Both Growth and Development
Some suggestions about the adjustments which seemed likely to be required to deal with the risks Australia faced because of the GFC were put forward in 2008 in Defending Australia from the Global Financial Crisis - on the assumption that the GFC reflected a structural, rather than a cyclical, challenge (for reasons similar to those mentioned above) . Adjustments suggested included: more realistic government machinery; short term counter-cyclical policy; recognition of the need for structural adjustment and adoption of methods to facilitate change; ensuring effective community awareness and involvement; and participation in global initiatives.
More recently A Case for Innovative Economic Leadership suggested ways to increase the resilience of Australia's economy in responding to potential economic shocks. This suggested enabling the accelerated development of regional industry clusters and rearranging tax powers so that state governments have financial incentives to take economic development (not just growth) seriously.
'Migration industries' are certainly a potential growth option for Australia's economy. However the disruption associated with congestion and inadequate infrastructure makes it appealing to divert as much as possible of the net population growth away from existing major cities (eg by significantly boosting growth in larger existing regional centres).
Some suggestions about managing economic and urban development outside Australia's major cities are presented in Re-imagining the Federation to Develop New Cities. This advocates a rethink of the traditional emphasis on politicisation and centralisation as the best way to manage growth and development.
If population inflow to several regional growth centres could be initiated through methods such as those suggested then the emergence of 'migration industries' would be very likely to generate large numbers of job opportunities and thus sustain (and perhaps) accelerate that inflow.
In passing it is noted that the serious defects in Australia's system of government that are hinted at above, are addressed more comprehensively (though at present in only a preliminary way) in A Case for Nation Building, In brief, this suggests an emphasis on 'nation building' (rather than the tradition of promising to 'build particular things for the nation') because the limits to rationality that make it impossible for central planners to effectively control an economy apply equally to the functions of governments.
In October 2010, proposals about rethinking Australia's approach to the future (especially in relation to population, the rise of 'Asia', a potential commodity super-cycle, and the need for more effective government) were put forward (by Brian Haratis of MacroPlan) as the basis for a national debate on 'Australia 2050'. Some comments on the issues raised in the MacroPlan proposals are outlined below.
|Addendum A: Comments on 'Australia 2050: Big Australia'||
Comments on 'Australia 2050: Big Australia' (email sent 28/10/10)
Re: Harley R., ‘Start planning for our very big future’, Australian Financial Review, 16-17/10/10
Following leads given in the above article, I watched your comments on the ‘Big Australia’ debate (on your website) and would like to provide some constructive feedback.
By way of background I should like to draw your attention to my own speculations which focus on one aspect of the ‘Big Australia’ debate (ie whether rapid migration is the solution to, or the cause of, skilled labour shortages), though they also comment on the requirements for effective growth / development management – see Developing Australia’s Economy: The Role of Migration. The latter also includes comments on the currently depressing effect (in Queensland) of declining migration flows.
Some reactions to issues raised in your video on the Big Australia debate follow this email. As will be obvious, these reactions involve both applause for your approach to innovative thinking and cautions about the complexities of the issues being raised.
I would be interested in your response to these speculations.
Reactions to Some Issues Raised
|Addendum B: Migration: A Bigger Picture View||
Migration: A Bigger Picture View - email sent 7/12/13
RE: How I got it wrong on migration, Business Spectator, 6/12/13
There are broader dimensions to the issues raised in your useful summary of questions about Australia’s rate of international migration. Your article suggested that:
I should like to suggest for your consideration that the issues are somewhat more complex than your article indicated because:
I would be interested in your response to my speculations.