Author Archives: Abdullah Nasir

For a nation built mostly on newly-arrived immigrants, it’s an issue guaranteed to inflame heated and at times vicious debate.

Outright distrust and opposition to anything “foreign” was part of our social fabric until 70 years ago, and at one stage was enshrined in our political system via The White Australia policy.

Then, the post war immigration boom saw waves of European refugees flee their war-torn homelands in search of a better life.

Those new arrivals changed Australia forever, overwhelmingly for the better, as did the influx of Asian immigrants fleeing conflict in the 1970s.

But despite the proclamations from our leaders that we are a tolerant mob who embrace cultural diversity, the deep-seated distrust among established Australians never really evaporated, as evidenced by the animosity towards new arrivals from the Middle East.

So inflamed are passions, it is nigh on impossible to have a sensible debate over levels of immigration whether it be in regards to the continent’s environmental sensitivities or on the impact on the economy.

Those who raise legitimate concerns often are accused of racism.

That’s understandable given environmental protection and the economy have become convenient smokescreens for those who harbour deep prejudices.

Aussie, Aussie, Aussie and GDP gold

Sometime in the next few weeks, there will be jubilation in the halls of Canberra when Australia assumes the world record for the nation that has stayed out of recession the longest.

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The March quarter GDP numbers are expected to show 104 quarters without a recession, besting current record holders at 103, the Netherlands.

If you ask our political masters, they’ll invariably declare that most of it was down to sound economic management, an independent central bank that made the correct calls at the crucial times, and a flexible economy that can handle the ebb and flow of global tides through a free floating currency.

That’s all true, to a certain extent.

But a fundamental ingredient in that economic miracle has been immigration and more particularly the extent to which the program has been ramped up in the past 15 years.

From around 90,000 at the turn of the century, our annual intake of immigrants has risen to more than 200,000 a year.

That’s put a rocket under our population growth rate, which has surged to 1.8 per cent over the past 15 years, way above the OECD average of 0.7 per cent.

From a humanitarian perspective, it’s allowed us to strut the world stage from the vantage of the high moral ground.

However, from an economic viewpoint, it’s delivered our leaders a convenient buffer with which to hide a multitude of fiscal sins and allowed them to shirk making tough decisions.

How immigration boosts GDP

There’s a fairly simple relationship between immigration and economic growth. The more people you have, the bigger your economy. More people buy more goods and services.

There’s nothing inherently wrong with boosting your growth through immigration.

But the crime committed by Australian governments of all persuasions in the past 20 years is that, while they’ve been happy to accept the kudos for economic growth, they’ve been totally unwilling to spend the necessary cash to ensure the economy can cope with such a dramatic influx of new arrivals.

In essence, they’ve cooked the books.

Political editor Chris Uhlmann discusses what the new Australian citizenship test says about Malcolm Turnbull’s leadership.
As a result, many of our major cities are choking. Our infrastructure is obsolete. Utilities are struggling. That, in turn, has adversely affected our productivity and led to further distortions in how our wealth is distributed.

The laughable illusion of our economic miracle — the nation that fuels and feeds the world — is highlighted by looking just one small step beyond the raw GDP data.

If you simply divide our economic growth performance by the number of Australians, our growth doesn’t look anywhere near as flash.

On an annualised basis, our per capita GDP growth has never been much above 2 per cent since the last recession 25 years ago, and that was for just a few years around the new millennium.

Most of the time it’s been around 1.5 per cent and more recently 1 per cent. That’s tepid at best.

That’s the reason why, in recent years, it often has felt like a recession. In fact, during 2009, the economy was in reverse when measured in per capita growth terms.

Once you spread the extra wealth around all those extra people, we’ve been barely marking time. So much for the boom.

More people, less pay, same old infrastructure

Most new arrivals head to where they can find work. That’s meant most immigrants have headed towards the biggest cities, Sydney and Melbourne.

Since around 2003, Melbourne’s population has swelled by almost 1 million, with Sydney not far behind.

All those extra people have to live somewhere and that puts pressure on housing.

Despite the common misconception peddled by shock jocks that new immigrants flock here for social security benefits, most in fact are desperate for work. That puts pressure on wages.

It is little surprise then that in the past decade, housing prices, particularly in the major centres have soared while wages growth now is the slowest since the last recession.

It’s never a simple, linear argument. Immigrants are amazingly adept at starting their own businesses, thereby creating employment.

And record low interest rates combined with tax incentives that have transformed housing into a preferred investment vehicle have been the primary drivers in inflating the east coast housing bubble.

But there’s no denying the failure of successive governments to develop infrastructure that would have facilitated new housing, thereby helping alleviate the dangerous east coast property bubble, and maintained productivity.

Immigration crackdown — Where now for growth?

In the past week, there has been a clear shift in Federal Government thinking. The scaling back of 457 visas — which undoubtedly have been rorted — and the tougher approach to citizenship appear to herald a new approach to immigration.

Once again though, the motivation appears to be more on pandering to electoral and party room prejudice than being sourced in sound economics or environmental grounds.

Political posturing aside, it would appear Canberra unwittingly has exposed itself to a far greater problem.

Without the immigration sugar hit, what will drive the Australian economy into the future?

Most of our economic growth forecasts have been based on population growth of around 400,000 a year; almost a new city.

With the mines now running at peak capacity, resource prices in decline and the east coast housing boom on its final doomed run, a pull back on immigration — the secret weapon in our economic miracle — will leave our leaders with nowhere to hide.

To further complicate matters, if productivity is to be lifted, a major infrastructure spend is required; the money that should have been spent all along to cope with the immigration intake.

Perhaps they will be forced to confront serious fiscal issues if they truly want to bring the budget deficit back under control instead of simply relying on endless numbers of new arrivals to inflate the economy and the tax base.

Maybe they will get serious about a resources rent tax, rather than idly standing by and watching the nation’s riches hauled off for little return.

Tax cuts for foreign corporations may take a back seat to enforcing the law on company tax. And they might even question whether we can afford the enormous tax breaks on superannuation and property investment for the wealthy.

Maybe. But it will probably take a recession to do it.

Far from the unfounded headlines about EU migrants grabbing British jobs, record numbers of British citizens are in work too

The disclosure before the crucial European Union summit that the number of citizens of other EU countries working in Britain had risen above the 2 million mark for the last six months was widely reported as bad news for David Cameron.

But behind the unfounded headlines about “EU migrants grabbing British jobs” lies a basic truth: that mass European migration is actually fuelling the relative growth of the UK economy that in turn is making Britain “the jobs factory of Europe” that brings them here.

For while some politicians chose only to focus on the growth of EU citizens employed in Britain, they ignored the fact that the same set of official statistics – the quarterly labour market survey – showed that record numbers of British citizens were in work too. Indeed, 1 million more Britons are in work and 850,000 more Europeans are working in Britain since David Cameron became prime minister.

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The fact of the matter is that the story of EU migration to work in Britain should not be seen as a sudden, recent mass invasion to be necessarily feared by every British worker. It is now a fact of life that Britain has been a country of net mass migration every year for the past 20 years.

As recent research from University College London shows, European migrants are not a drain on Britain’s finances; what is more, they actually pay in more in taxes than they take out in state benefits. That contribution – valued at £2bn a year – is helping to fuel Britain’s economic growth.

Their studies also explode the myth that they are all Polish plumbers undercutting honest British workmen.

More than 60% of new migrants from western and southern Europe, who account for 900,000 of the 2 million who work here, are now university graduates. For eastern Europeans, 25% are graduates – similar to the proportion in the UK-born workforce.

And no, they are not all working as baristas in coffee shops. Britain is managing to attract the highest number of university-educated migrants of any country in the EU year after year to work in the financial, technology and media industries.

It is against this background that the summit debate about EU migrants and benefits needs to be judged.

The latest figures show that while there are 2 million EU citizens working in the UK, there were a further 91,700 – or 4.5% – who were claiming out-of-work benefits last summer. A further 317,000 of the 2 million – around 15% – were claiming tax credits, underlining that the overwhelming majority are not in the lowest paid jobs.

So what impact will the “emergency brake” of restricting access to in-work benefits for the first two to four years actually have? Nobody has any conclusive figures to know how many EU migrants claim benefits in their first four years in the UK. But there now appears to be some agreement that Britain is such a powerful “jobs factory” that it is the prospect of a job rather than claiming benefits that is attracting them.

It is important to note that there is no uniform social security policy in Europe. Each country has its own criteria and qualifying period for different types of benefit. Many of the 28 countries have almost entirely a contributory or social insurance based system before benefits can be claimed.

At one extreme an EU citizen has to live in the Czech Republic for 10 years before they can claim incapacity benefit. In some cases national insurance contributions made in one country can be used to qualify for benefits in another.

Against this background Britain’s move to introduce a phased qualifying period of between two to four years for certain in-work tax credit benefits could be seen as a modest measure that simply brings the UK into line with common European practice. If anything the emergency brake could be said, like so much of this debate, to make us into more of a modern European country.