Mythical need for skilled labour cannot justify social and economic harm of high immigration - a reply to Michael Danby

Michael Danby is chairman of Federal Parliament's joint committee on migration. It is very disappointing, therefore, that in recent newspaper articles he expresses support for Australia having a population of 35 million by 2050. He says he is optimistic that we can cope with this huge increase by better planning, traffic management and water and energy conservation policies, and that he has good "vibes" about population growth being good for the economy. But he and the Rudd Government need to come up with far more convincing arguments to allay the concerns of the many sceptics who question the alleged benefits of population growth, and who believe that politicians are mere puppets of the business lobby on whom they depend for financial support.

The optimistic belief that environmental concerns can be mitigated by good management is at odds with our appalling record in traffic management, town planning, decentralisation, and environmental management and pricing. Add the current climate change debacle and the record is complete. What evidence is there to suggest that our socio-political-administrative skills have improved to the extent that we can do better in future?

Concerns about an ageing population need to be assessed in the light of historical trends. Birth rates and death rates have been in long-term decline for the last 150 years or more, but any potential burden of an ageing population this might have created has been offset by income growth. The recently released intergenerational report also projects that per capita incomes will continue to improve for another forty years (by an average 1.5% p.a. in real GDP compared with 1.9% over the last 40 years), despite an ageing population. Knee-jerk reactions to boost the birth rate or immigration numbers are clearly unwarranted.

Income growth has also prevented a run-away decline in housing affordability, as population growth pushes up land prices and housing costs. But if we could achieve population stability, house price inflation would be restrained and housing affordability would steadily improve, with profound benefits for low-income earners now priced out of the housing market and trapped in a vicious circle of rental dependency. A similar equity effect was obtained from the 2006 Productivity Commission study, which estimated that the main beneficiaries of skilled immigration were the owners of capital, but at the expense of the losers - wage earners. Why a Labor government would allow and even pursue a result so detrimental to its mainstream constituents defies belief.

Danby refers to an Access Economics study which estimated the positive effect of immigration on taxation revenue. The Productivity Commission study also found that skilled immigration increases taxation revenue, but that increase, together with the gains in property income, were outweighed by the loss in wages referred to above, resulting in a loss in resident per capita income overall. If environmental losses could have been measured and factored in, the results would have been even worse.

The argument that immigration is needed to overcome skills shortages is one of the great beat-ups in the immigration debate, designed to cover up our failings in education and manpower planning and provide a convenient excuse for businesses to take advantage of cheap imported labour. And how, in all conscience, can we aspire to helping poorer countries while depriving them of skilled labour they so desperately need? Where is the morality?

Politicians need to rely less on "vibes" and more on basic economic and environmental principles. Many believe that Australia's population has already exceeded optimum size, after which "diminishing returns" set in with declining productivity growth, welfare losses and environmental deterioration. These take many forms; for example, the enhanced costs of desalination plants, rail tunnels, high rise buildings and other infrastructure developments needed to cater for a growing population. Deteriorating parks and gardens due to water restrictions represent welfare losses, as do greater travelling times and outer urban isolation as cities spread out horizontally. Logging in water catchment areas, species extinction and land degradation are just a few of the many irreversible symptoms of a worsening environment resulting from human habitation. These cannot simply be avoided by good management, as Danby would have us believe.

Increased population has a "wealth diluting" effect, of both capital and natural wealth. This shows up in many ways, such as smaller sized building blocks induced by higher land prices, water shortages as our scarce water reserves have to be shared by an increasing number of consumers, and reduced family inheritances if family size increases (which, paradoxically, increases the burden of an ageing population!). Even attendance at major sporting events can require intense competition for tickets and limited space. Higher prices might bring markets into equilibrium, but the poorer among us miss out. What is Danby's solution to that?
Proponents who say that growth should be left to market forces must face up to the reality that many market imperfections cannot be effectively corrected by regulation. In particular, many "market externalities" (so basic to environmental understanding) cannot be effectively internalised, such as the disamenities inflicted on neighbourhoods by medium density housing development.

Kevin Rudd (ABC 1, 28/1) now adds "national economic security" as an objective of a larger population. Are we to believe that degradation and depletion of our natural resources is the way to achieve economic security? The population debate obviously has a long way to go.