Respected Treasury voice Martin Parkinson says slashing immigration won’t just cost us growth, it could cost the surplus too. Here’s why One Nation and the Coalition’s push for lower migration numbers might be a political winner but economic loser.
A former top public servant has warned that if One Nation and the Coalition have their way in reducing immigration it would lead to a range of economic problems including debt repayment challenges and a recession. But given the inflation effects of too many immigrants and hopeless productivity, is this another recession we have to have?
Of course, I don’t want a recession with the implications for people losing jobs but we seemingly have had a conga line of loser political leaders who seem powerless to apply the economic policies needed to get productivity up and inflation, as well as interest rates, down.
Martin Parkinson has worked for both Labor and the Coalition and has been Treasury’s top dog, but he has always had that public servant’s approach which, to me, looked more closer to Labor values. And that’s why his warning that One Nation’s and the Coalition’s support for lower immigration, compared to Labor, looks like a good political message that Treasurer Jim Chalmers would be happy about.
This comes as Home Affairs Minister, Tony Burke, is expected to announce Labor’s lower immigration targets this week, where the average 300,000 net migration figure gets cut to 225,000 or so.
One Nation wants it trimmed to a low 130,000, so it more closely matches how many homes we build in this low productivity economy.
However, Parkinson has outlined some economic failures that the Treasurer shouldn’t be happy with, so let me give you Martin’s full monty. Here goes:
- By cutting immigration, you’ll have less people to pay income taxes to help make the ballooning government debt repayments.
- Given where we are in the economic cycle, Dr Chalmers should have budget surpluses not deficits.
- The projected headline cash deficit is a cumulative number of $264 billion over the next five years, which is crazy big. (My words not Parkinson’s)
- He backs greater higher skilled migrants, rather than temporary low skilled ones.
- He says by cutting migration to 130,000 you’d be and I quote: “…closing down chunks of the Australian economy.”
- He argues backpackers and temporary workers are important to agriculture, regional towns and tourism.
Meanwhile, the Economics Editor of the AFR, John Kehoe, reveals Treasury calculations that will surprise many. “Treasury research published in 2021 found that most primary skilled migrants pay substantially more in taxes over their lifetimes than they receive in government services,” He reported. “Primary holders of permanent employer-sponsored visas were estimated to contribute a net $557,000 to the budget over their lifetimes, while skilled independent visa holders contribute a net $386,000.”
But get this comparison of a gainfully employed immigrant versus an Aussie. “By comparison, the average Australian has a negative lifetime fiscal impact, consuming about $85,000 more in government services than they pay in taxes,” he put out there.
Kehoe’s story on Parkinson is an interesting read, with Parkinson casting “doubt on whether the budget would ever reach another surplus on existing policy settings.”
This isn’t a great thumbs up for Treasurer Chalmers. Undoubtedly, Parkinson’s economic analysis of what lower immigration could do to the economy in slowing down growth and he implies a recession could be the outcome. And he’s probably right, but he, like others, has ignored the missing piece in our problematic economic puzzle: our hopeless productivity!
The irony is if immigrants are selected sensibly, then you end up with a mob of hard workers because they’re aspirational but they’re often frustrated by excessive regulations if they start a business. And if they’re an employee, they learn from Industrial Relations Ministers like Tony Burke, who ironically is now our chief immigration minister, that the Australian workplace is great for workers, compared to where they come from, but not productivity and the employers who risk their capital to create jobs to hopefully make profit.
It’s like Martin Parkinson knows the Canberra political scene so well, that he knows nothing will happen to our productivity, so we need immigration to grow the economy, which then lowers the budget deficit, which has been helped by a very good mining sector that pays a lot of tax.
Imagine if the global economy had another worldwide recession like the GFC and mining fell into a hole. I hope we end up with a political leader who addresses our productivity problem before that happens!
Other countries import unskilled labour (eg fruit pickers) and skilled labour (eg builders) on temporary work visas. The workers go home once they become unproductive. They do not stay to become a burden in social security. The sponsor pays their wages AND health cover.
We can cut permanent immigration and still have a productive in the area needed and only for the period needed.
ON is not going to cut temporary farm workers if you bothered checking. Also the 130,000 is for permanent and long term visa approvals so that will mean negative NOM as typically 200,000 or so people leave each year – you couldn’t even get that right.
The boost to the budget is tiny compared to the infrastructure costs resulting from a ballooning population which you both ignore. The federal treasury has only two KPI’s – headline GDP growth and the federal budget. You might as well be quoting property developers.
Unfortunately most commentators spruik half truths. I believe most Australians would welcome immigrants who integrate, work and pay taxes. It’s those that strain our economy, public, police, social and security services they don’t want. It would be interesting to know the percentage of immigrants who don’t work, need 24/7 monitoring and are convicted of crime. The need and the cost for public servants would be astronomical that delivers no economic benefit. Keeping in mind that those convicted are a small percentage of the crimes that are committed.
A cut in immigration might reduce income tax returns but that’s easily covered by making the gas, resource, and multi-national companies to pay their fair share.
“Treasury research published in 2021 found that most primary skilled migrants pay substantially more in taxes over their lifetimes than they receive in government services,” He reported.
Schoolboy error. Ignores the population effects of a few hundred thousand migrants arriving each year and using infrastructure as soon as they step of the plane. This creates a deficit of at least $40 billion pa – which is mainly up to the existing population to pay for.
The factor that everyone overlooks is the impact that immigration has on per capita wealth creation. Australia’s wealth creation is almost exclusively limited to what is produced from the land, i.e. agriculture and mining. 98% of other forms of employment, while essential to a functioning economy, are merely service industries that produce nothing of tangible value.
If we liken Australia’s land based economy to that of a farm, the more people dependent on what the farm is capable of producing, the lower the per capita income.
I agree with all Phillip Brown says.
He presents the whole argument.
By doing this he and his comments get credibility.
Maybe a fair price to pay? Less congestion, better social cohesion, greater incentive to add value and work smarter. Better not bigger!
Easy to start and keep a Ponzi scheme going with an eager and never ending supply of migrants wanting to escape their overpopulated countries, harder to make the decision to stop the scheme and face reality!
I would like to see where Philip Brown obtained his “$40 billion pa” deficit due to migration and the reasons why greater use of “infrastructures”, whose cost is primarily fixed, would not improve productivity.
Kehoe analysis is based on realities. As a migrant who paid his ticket to land here in 1970, I contributed to Australia from my first pay 2 days after my arrival. Like the vast majority of migrants I worked for 40+ years and I never made use of social security payments. In retirement I draw no pension since I invested my earnings instead of drinking it or betting on horses. And like, millions of other migrants.
Show me the money Philip. Kehoe did, where is yours to accuse him of “schoolboy error”.
Well described by economists/ academics – the infrastructure deficit. This forum doesn’t allow links. Migrants use it as soon as they step off the plane – while not having been here decades paying taxes. This creates a deficit.
The rule of thumb is that 2% of infrastructure has to be replaced each year due to age/ wear and tear. So if you grow the population by 2% pa you double the infrastructure bill.
Not sure what you are on about regarding productivity as its growth has slumped in step with the ramping up of immigration in 2006. There are well described causal links between the two.
Also Kehoe only mentions primary skilled immigrants. They are the minority. They bring a long tail of less skilled dependents. Then there are 20,000 or so refugees and the huge number of students who all use our infrastructure.