The Economics of Immigration
Australian Society and Politics, News, The Australian Economy | 3rd August 2021
Talk to the Sydney Institute, 3rd August 2021.
The margin by which Australia’s economic growth rate has exceeded the average for all ‘advanced’ economies over the past two decades is almost entirely attributable to Australia’s immigration program. But that’s not the criterion against which it should be judged. Australia’s immigration program has made a small but positive contribution to Australia’s real per capita GDP growth rate – which is a more appropriate yardstick – as well as enriching Australia’s society in other ways which aren’t captured by statistics such as GDP. Some of the costs associated with Australia’s large immigration intake aren’t captured by GDP either – although they can and should be addressed by means other than curtailing our migration intake.
The positive contribution which Australia’s immigration makes to Australia’s economy, and to the ‘well-being’ of Australians, arises largely because our migrant intake has been much more heavily skewed towards people with skills than that of many other countries. But there is some evidence that this ‘skew’ has been diminishing in recent years – something to which the RBA Governor recently drew attention. And if not corrected, this trend could detract from the net benefits which immigration has created for Australia. So there is a case for re-thinking some dimensions of Australia’s immigration program when our borders are eventually re-opened.
In the meantime the ongoing closure of our international borders is providing a significant, but under-appreciated, short-term boost to domestic spending and accelerating the decline in the unemployment rate. Both of those sound like Good Things – but there is more than a whiff of ‘protectionism’ about forcing Australians to spend at home money that they would have preferred to spend overseas, in order to boost employment at home. Australia has been there before – and the long-term results were not good. It’s to be hoped that we are not returning to some of our old bad habits.