It's worth bending an ear to prophets of financial doom because that’s what keeps markets balanced. If we were all bullish, we’d have been rooned, as farmer Hanrahan said in the poem, years ago.
But there’s an entertaining twist about the current Australian tour by US economist and demographer Harry Dent.
Harry’s pushing a new book entitled “Zero Hour,” which is about what he says will be the “greatest political and financial upheaval in modern history."
That’s a big headline, but it’s not wonderfully informative, because we all know markets have regular busts of the sort seen around the world in 1987, in Asia in 1997 and again in 2008 with the Global Financial Crisis.
The twist is that he sees Australia as being less affected than most other developed countries if there is a major global economic bust, with the understandable exception of a likely drop in property prices.
He bills himself as a demographer and his core thesis is that as the Baby Boomers around the world ease back on spending, and the youngest is now 57, we’re headed for an inevitable slowdown.
Where’s he’s a bit exposed is that last time he was here in 2014 he predicted a major bubble-burst in the Australian property market which has not happened.
He also predicted that we would be economically drowned by a China-created tsunami that would wipe Australia out.
That hasn’t happened either, although a property bust and/or a China bust are certainly possibilities. And of course the latter would most certainly have dramatic negative effects in our economy.
But it must he hard work for a demographer peddling gloom in a country like Australia because he knows that Australia’s better placed than almost any other developed country to control its demographics, most particularly the growth rate of its population.
ECONOMY DOWN UNDER
Given the positive demography of Australia, his messages of doom are going to scrabble for traction.
As he put it in an interview with Peter Switzer last week, “no longer are demographic trends pointing up in the developed world except for Australia - lucky you guys.”
He was basically saying we can avoid at least some recession and most importantly, support an ageing population, by bringing in young and well educated migrants from around the world. Very few other countries have that option.
This was just before the Tony Abbott-versus-most people argument about population growth burst on the scene, with Abbott calling for a halving of immigration because of issues such as strained infrastructure, unaffordable housing and crime in Melbourne caused by young men of African heritage.
That got jumped on by Immigration minister Peter Dutton and others, leaving the former Prime Minister in a minority, if a noisy one.
He had a raft of online supporters, many of whom could spell, cheering on some or all of the points he had made.
So that’s where we sit now: Harry Dent concedes that we should be able to dampen the effects of any global recession by taking in more migrants, and lots of people in Australia who have been stuck in traffic are blaming the migrants already here.
While I understand the critics’ arguments, I believe that they are being short sighted.
Melbourne based journalist and author George Megalogenis made a strong argument in his 2015 book “Australia’s Second Chance” in which he noted that most economic stagnation or recession in this country has tended over the last century to occur whenever there was a cutback in immigration.
He sees carefully managed migration as a massive long term positive.
And CEDA, the Committee for the Economic Development of Australia, is with him.
“The simple fact is migration has contributed substantially to the growth of Australia and will continue to do so into the future,” explains CEDA.
It recently conducted research that found annual permanent migration could double over the next 40 years and deliver “significant per capita economic benefit.”
Where I sit, those growing pains are real enough but they are not insuperable. They can all be picked off, one by one.
Creaking infrastructure? Fix it. Governments and corporates can still borrow at historically low rates to build extremely efficient railways and at some point in the next 50 years a Very Fast Train or network of VFT’s will allow more people to live outside Australia’s big cities and commute into them, assuming of course they will still need to commute.
And cars? It may be that car sharing finally takes off and all those car parks will be more than slightly redundant.
Water management will of course be difficult, as ours is the driest continent, but that one’s not insuperable either. Re-use, desalination, anti-evaporation measures and irrigation management strategies in the southern half of the continent will go a long way to increasing Australia’s potential population capacity. Meanwhile the tropical zone gets enough rain each wet season to support infinitely greater populations, as our neighbouring countries to the north have shown for centuries.
House prices? There have been major scams with overseas investors using their children as nominees to buy established properties, but properly administered legislation favouring Australian residents, a legislative bias towards owner occupiers and a clearly articulated policy on interest rates will go some way to reducing that problem.
The irony there is that it’s those very low interest rates which have got buyers excited about how much they can afford to borrow, rather than what properties might actually be worth. If rates are ratcheted up carefully, the bubble will deflate by itself, or prices will at least plateau.
Criminal gangs among migrant communities? We’ve seen this before in Sydney’s Cabramatta with Indo-Chinese gangs, 25 years ago, and now it’s better known as a foodie destination.
There are always stresses and strains when migrant groups contain bigger percentages of refugees, because in many cases there’s a lack of male role models, because in many cases they are either not around, or, worse, dead.
It must have been a total horror for the owner of a Melbourne jewellery shop having it smashed up by baseball-bat wielding thugs, as happened recently in at least one case, but that’s no argument for putting the brakes on the economic potential of your country. As a percentage of the migrant population, the villains are a rounding error.
So when Australia has a massive inbuilt advantage that even a professional bear such as Harry Dent is prepared to concede, we might as well use it.
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