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!
