The little debate about a big Australia

Australia’s pro- and anti-population growth advocates seem to be competing with each other to see who can produce the most glib, fact-free piece of propaganda.  Dick Smith’s entertaining anti-growth advocacy-doco Dick Smith’s Population Puzzle, screened in the lead-up to the recent federal election, deployed just about every cheap propaganda trick in the book.

Now the Centre for Independent Studies has published an even less substantive pro-growth “policy monograph” by Brown and Hartwich.  An op-ed piece by Oliver Marc Hartwich in this morning’s Oz arguably sets a new benchmark in fact-free opinion journalism.  As far as I can tell, its entire hypothesis seems to be that Paul Erlich’s doomsday predictions in the 1970s were wrong, and therefore anyone who raises any questions at all about the wisdom of unrestrained population growth is by definition a left wing fool who should be ignored.

The CIS monograph for which Hartwich’s article is a promo isn’t much better.  Its entire analysis of the environmental issues surrounding Australia’s future population growth is as follows:

Bernard Salt also dismisses the argument that population growth will be environmentally damaging. Salt maintains that the greater focus on environmental planning means future population growth will damage the environment far less than past population growth. Julie Novak, Research Fellow with the Institute of Public Affairs, says, ‘For many environmentalists, the arguments for a larger population come across as nothing more than some sort of pro-growth corporate conspiracy.’ Columnist Paul Kelly says that setting a ‘carrying capacity’ is an ‘untenable exercise in imposed utopianism,’ while commentators such as The Age journalist Julie Szego suggest that ‘climate change is a red herring in the population debate’ and that arguments against population are a triumph of misanthropic NIMBYism. The debate about population growth looks set to be long-lasting and controversial. But what will the population actually look like?

I’m by no means a supporter of the Dick Smith population doomsday line of argument, but I’d be more likely to be persuaded by the CIS if they had bothered to grapple with questions such as how rapid population growth interacts with the fact that Australia is the driest inhabited continent on earth as well as the most urbanised; that only 10% of our land mass is fertile and arable and that this area (the coastal fringe) is also where everyone wants to live; and that population growth will inevitably make it more difficult for us to achieve any carbon emissions target we might eventually aspire to meet.

However, to me the most cogent arguments that pro-growth advocates need to address (and the CIS doesn’t) are economic rather than environmental ones.  As Ross Gittins explained in an article several months ago:

So let’s get both sides out of their corners to debate the issue in front of us. We can’t continue treating the economy like it exists in splendid isolation from the natural environment. Even when you ignore the environmental consequences, the proposition that population growth makes us better off materially isn’t as self-evident as most business people, economists and politicians want us to accept. Business people like high immigration because it gives them an ever-growing market to sell to and profit from. But what’s convenient for business is not necessarily good for the economy.

Since self-interest is no crime in conventional economics, the advocates of immigration need to answer the question: what’s in it for us? A bigger population undoubtedly leads to a bigger economy (as measured by the nation’s production of goods and services, which is also the nation’s income), but it leaves people better off in narrow material terms only if it leads to higher national income per person.

So does it? The most recent study by the Productivity Commission found an increase in skilled migration led to only a minor increase in income per person, far less than could be gained from measures to increase the productivity of the workforce.

What’s more, it found the gains actually went to the immigrants, leaving the original inhabitants a fraction worse off. So among business people, economists and politicians there is much blind faith in population growth, a belief in growth for its own sake, not because it makes you and me better off.

Why doesn’t immigration lead to higher living standards? To shortcut the explanation, because each extra immigrant family requires more capital investment to put them at the same standard as the rest of us: homes to live in, machines to work with, hospitals and schools, public transport and so forth.

Little of that extra physical capital and infrastructure is paid for by the immigrants themselves. The rest is paid for by businesses and, particularly, governments. When the infrastructure is provided, taxes and public debt levels rise. When it isn’t provided, the result is declining standards, rising house prices, overcrowding and congestion.

I suspect the punters’ heightened resentment of immigration arises from governments’ failure to keep up with the housing, transport and other infrastructure needs of the much higher numbers of immigrants in recent years.

This failure is explained partly by the rise of Costelloism – the belief all public debt is bad – but mainly because the federal hand has increased immigration while the state hand has failed to increase housing and infrastructure.

The CIS seems to be trying to create the impression that population growth is something we just can’t control and that we should just get used to it:

In the recent federal election, both Labor and the Coalition seemed to suggest that they could—and would—limit population growth, particularly by restricting migration. The Greens went a step further by endorsing a population cap.

But these platitudes overlook a fundamental fact. Under every realistic scenario, Australia’s population is going to keep growing. Australians will also keep getting older— a fact often neglected in the current debate—which will have huge implications for our future policy environment.

Under all but one of the 36 scenarios modelled in this report, Australia’s population will grow. …

No one can know exactly how these variables will change in the future, which means no government can accurately predict what Australia’s population will look like. Population targets are unrealistic. We cannot plan our demographic future.

However, this is a question-begging straw man argument.  Almost no-one is advocating no growth at all; the real question is how much growth? Even Dick Smith only advocates reducing migration to 70,000 per year, which is likely on CIS projections to result in a population a bit under 29 million by 2050.  Moreover, although we can’t control future population size with precision, we can certainly make policy choices which will directly impact the outcome i.e. not only choices about migration rates but incentives to higher fertility like the baby bonus.  There seems little doubt that at least part of the higher Australian birth rate over the last decade is a result of deliberate government policy, not only the baby bonus but more general policy settings seemingly designed as a response to concerns about an ageing population flowing from the Inter-Generational Reports.  The approach is colourfully epitomised by Peter Costello’s admonition to have “one for Mum, one for Dad and one for the country”.

Indeed, as far as I can see the possible economic impacts of an ageing population are just about the only strong argument in favour of continuing deliberate rapid population growth. 11. KP: In the long term at least.  In the short term we don’t have much choice but to continue a fairly large migration program to cope with labour shortages flowing from the minerals boom.  Those shortages in turn flow in part from the Howard government’s long term failure to invest enough in education and training. []  As the CIS monograph notes in relation to the 2010 Inter-Generational Report:

The IGR projects that the proportion of Australians over the age of 65 will grow to more than 20% of the population in 2050, up from just over 10% now. The proportion of Australians in the labour force will fall, economic growth will slow, and the cost of providing health care and the pension will rise—resulting in a growing fiscal gap where the government’s expenditure will exceed its revenue. By 2050, net debt would be 20% of GDP and rising—an unsustainable arrangement that was recognised as such by the 2007 IGR.

Now there may be cogent arguments that these fears are exaggerated, but I’m assuming for present purposes that they’re justified.  However, even if that’s the case, is rapid deliberate population growth the only available sensible solution?  Is it a sensible solution at all?

Might we not consider deliberately embracing a significantly older (voluntary) retiring age instead?  After all, the traditional retiring/pensionable age of 65 was set at a time when average live expectancy was around 70-75.  Nowadays it’s over 80 and likely to be between 85 and 90 by 2050.  Moreover most people remain healthy and active through most of those lengthy retirement years.  I suggest governments should begin building policy responses based on those facts, and create tax and other incentives for many more people to remain in the workforce on at least a flexible part-time basis until the age of 70 if not 75.  I strongly suspect that enough people would take up the option to work for a few more years so that inter-generational pressure on the budget bottom line would cease to be an issue.

About Ken Parish

Ken Parish is a legal academic at Charles Darwin University, with research areas in public law (constitutional and administrative law) and teaching & learning theory and practice. He has been a legal academic for almost 12 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in he early 1990s.
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12 Responses to The little debate about a big Australia

  1. Richard Green says:

    This is a good piece.

    I do think there is an unspoken assumption that should be made explicit. For instance we could restate

    Indeed, as far as I can see the possible economic impacts of an ageing population are just about the only strong argument in favour of continuing deliberate rapid population growth

    to end with

    – assuming that we evaluate policy based solely on the interests of the existing Australian population

    .

    That is, whatever the impact on us – existing Australian residents – the fact that simply moving into the Australian economy lifts both the productivity and living standards of migrants from the vast majority of the world’s countries means that immigration increases global output and living standards – in the jargon it’s still a positive sum deal. It might make sense for politicians to ignore this – potential migrants aren’t voters – but from a purely policy perspective it can’t just be dismissed based on a sovereign border.

    This is the only really compelling argument to me from either reduced or increased migration. And no-one is making it, I guess because it’s not relevant to existing residents’ material interests.

    I am unconvinced of the need for a target population, or a population policy. Methods to deal with higher population yes, but choosing a number of people and aiming for it doesn’t have much going for it.

    Even the short term “skills crisis” doesn’t make much sense. There’s nothing terrible about wage growth for skilled workers, particularly if it attracts more apprentices into the trades (and away from, say, university degrees that offer neither needed skills nor mental stimulation). Using migration in the short term to keep wages down may simply inhabit the adjustment process by indicating that government policy will be directed to keep wages in certain jobs down – at least such arguments would be made if policy was intended to lower profits and/or CEO pay. The resentment by managerial classes to market mechanisms (they’re not proposing laissez faire migration after all, but planned migration in certain sectors)when the beneficiary is labour doesn’t make a crisis, just an indication of how public debate tends to make their interests synonymous with the national interest.

    I also worry about using population growth as a demographic fix for the aging population. Do we try to target a flattish age distribution or a traditional demographic pyramid where younger generations out number the old? If the latter, do we then try for an even larger generation below that the support the larger generation we created to support the boomers? I think simply swallowing the boomer bulge would be a better long term solution than trying to engineer a desired age distribution.

    I am also deeply skeptical of anyone that warns against immigration on the basis of population size without warning against the pro-natalist policies you mention.

    That said, the environmental arguments do need to be addressed. I tend towards thinking that these problems would need to be tackled even with zero population growth, and the need is actually quite acute. Discussing population, and then talking about how one doesn’t have to be a xenophobe to advocate limited immigration and how one just gets howled down for being a racist anyway but one is very mature and serious minded by addressing a sacred cow – it all ends up being a posturing contest (just like has happened with the nuclear power “debate”) and the actual environmental issues are obscured.

  2. Ken Parish says:

    “I am unconvinced of the need for a target population, or a population policy.”

    That’s one area where I agree with the CIS. However I think we SHOULD consider whether in the medium-long term we should be adopting lower immigration targets and reducing or abandoning the baby bonus and similar programs, predominantly because of the environmental issues. However I also think Gittins has a point and I’m unconvinced by your global “positive sum deal” argument. Unless and until we find ways to add large numbers of migrants to our population quickly without drastically increasing our carbon footprint we’re just making things worse. Embracing the nuclear option may well help, and we might find other and better ways (e.g. wave power; solar thermal, geothermal etc) to fuel desalination plants so we can accommodate more people in currently dry areas. But until those policies are in place and the technologies perfected, I don’t think it’s a “positive sum deal” at all.

    “… Using migration in the short term to keep wages down may simply inhabit the adjustment process by indicating that government policy will be directed to keep wages in certain jobs down …”

    I don’t read the 457 visa policy, at least in its Rudd/Gillard form, as being directed at keeping wages down. Visa terms forbid importing labour for any less than a wage that is substantially above average weekly earnings, and the requirements to establish a real shortage have been strengthened in my understanding. The minerals boom has led to a genuine and absolute skills shortage in some areas. At least for the 3-5 years period it will take new tradies to skill up to take advantage of those opportunities, we have no real choice but to import skilled people to fill the vacancies we can’t fill from within the existing Australian population. I certainly agree that 457 visas should NOT be used to inhibit the operation of the market to provide incentives for people to move towards skilled trades that are in demand.

  3. Martin says:

    After all, the traditional retiring/pensionable age of 65 was set at a time when average live expectancy was around 70-75. Nowadays it’s over 80 and likely to be between 85 and 90 by 2050. Moreover most people remain healthy and active through most of those lengthy retirement years.

    There’s a major assumption with this, and that is that we are all white-collar workers. A later retirement age is all very well for people like myself who work in front of a computer all day, my body is not being particularly stressed and working till 70 seems perfectly okay. But I have two brother-in-laws who both work in physically demanding jobs, one in his late 40s and one in his early 50s and both already have issues which make working to 65 problematic, let along later. Given that changing careers at this stage is basically impossible, any proposal to extend the retirement age needs to be very carefully thought through and comments about how we are all so much healthier than past generations really need to be considered carefully.

  4. Ken Parish says:

    Martin

    I wasn’t suggesting FORCING people to keep working beyond 65, just provding tax and other incentives for those who CHOOSE to do so, but not to such an extent that those who still choose to retire at 65 (or who have no effectve choice because they’ve worked outdoors all their lives and are buggered) are impoverished.

  5. conrad says:

    “There’s a major assumption with this, and that is that we are all white-collar workers”

    That might be true of today’s worker, but it is based on the assumption that the white-collar worker of today will be like the white collar worker of tomorrow. Given the current trend towards more and more people being overweight and obese, I’m not entirely sure that’s going to be true. I would think that in the long term, by the time people get into their 60s, most will have been seriously overweight for decades of their lives, and it’s hard to see how that won’t cause large amounts of serious health problems, some of which are well known (e.g., strokes, muscular problems, problems associated with diabetes…) and some less well known but probably still important (e.g., cognitive decline associated with poor health outcomes).

  6. derrida derider says:

    A very good post, to which I could make a lot of comments. However I’ll restrict them to two:
    – recent higher birth rates are certainly the result of changed financial incentives, especially Family Tax Benefit. Its wrong to say, though, that these were a response to population ageineg:

  7. derrida derider says:

    Grr – what about a preview button? To continue:

    1) recent higher birth rates are certainly the result of changed financial incentives, especially Family Tax Benefit. Its wrong to say, though, that these were a response to population ageing:

  8. derrida derider says:

    1) recent higher birth rates are certainly the result of changed financial incentives, especially Family Tax Benefit. It’s wrong to say, though, that these were a response to population ageing:

    – pork barrelling and ultra-conservative social views had lot more to do with it than demographic considerations
    – in any case, raising the birth rate actually worsens things economically for a few decades because it adds a youth dependency problem to your age dependency one and it draws prime-age women workers out of the workforce.

    2) IMO the best arguments for high immigration are social rather than economic. We gain immensely from cultural diversity, and we also counter international perceptions (not always entirely groundless) that we are a self-absorbed bunch of racist hicks.

  9. Tony Healy says:

    Ken, your understanding of the workings and aims of the 457 visa system is not correct.

    Promoters, employers and government are all on the record as claiming the visas are intended to prevent wage increases. Of course, they also know they’re not supposed to say this, so their utterances are usually made in unguarded moments or when they believe critics are powerless. For example, this argument was strongly made after the Howard government won control of both houses in 2004.

    Second, as to the workings, there is no requirement that wages be “substantially above” average wages. I presume here that you mean the average for the particular role being filled by the visa holder, because otherwise there’s no point in making the argument. There are prescribed minimum wages for visa holders, but they’re well below average pay in those roles.

    When challenged on this, the Federal and several state governments have deliberately muddied the waters by citing the wages of doctors and high income executives. But those are not characteristic of all 457 visa holders.

    Also, there is actually no requirement to establish that there is any shortage before sponsoring a 457 visa holder. It’s perfectly legitimate to sponsor a 457 visa even if there are 1,000 qualified locals begging for the job. This feature was specifically built into the 457 visa system and is strongly defended by the numerous vested interests that benefit from it.

    As to your points about the CIS piece, I agree. Promotion of immigration seems to be essentially ideological. There are also well-funded campaigns aimed at undermining criticism.

  10. Ken Parish says:

    DD

    “IMO the best arguments for high immigration are social rather than economic. We gain immensely from cultural diversity …”

    I agree though with qualifications. In part it depends what you mean by “high”. I certainly support a migration program somewhat higher than the 70,000 per year that Dick Smith et al advocate, but nowhere near as high as the 300,000 Australia was running at just before the GFC. That manifestly created large and (in the short term) unsustainable adjustment pressures, and if maintained would certainly lead to an uncomfortably high population by 2050 with all the environmental problems alluded to in my primary post.

    Your diversity point also needs to be explored. Nicholas Gruen highlighted some research recently which belies earlier research suggesting that cultural/racial diversity undermined social capital (at least in the short to medium term). The new research suggests that the social effects may be positive even in the short term in an affluent modern society:

    under good institutions diversity leads to economic progress. A culturally diverse society or interaction among different cultures encourages exchange of, and competition between ideas and different world views.

    But good institutions include providing the education, training, support etc that new migrants need to settle successfully in a new country, and that includes presiding over a program that allows migrants to arrive at a rate that we can cope with and provide the necessary support (and indeed public infrastructure). It probably also includes adopting settlement practices which reduce the incidence of large ethnic enclaves which inhibit the sort of productive, creative interaction among diverse cultures that produces happy economic and social outcomes.

  11. Richard Green says:

    On the cultural front two minor points. The first is that it is certainly possible for immigration to overwhelm the existing culture to the extent that it is nearly destroyed (see Australia 1788 onwards) – but I don’t think we’re anywhere near that.

    Another is I’m fairly sure that in 2007 Tony Abbott made an argument that to worry about multiculturalism was to express a lack of faith in the appeal of the core culture. In his (then) viewpoint, immigration had failed to dilute what he valued in Australian culture, because what he valued was soon valued by the migrants because it was so plainly good. A conservative defence of migration from diverse backgrounds if I ever heard one.

  12. Robert Braby says:

    “Almost no-one is advocating no growth at all; the real question is how much growth?”
    Not so, Ken. Sustainable Population Australia has for many years had reduced population as its major objective. And at a meeting to discuss population a few years ago, the audience was asked to nominate what they thought Australia’s optimum population to be. Responses ranged from 5 million to 20 million!

    “Indeed, as far as I can see the possible economic impacts of an ageing population are just about the only strong argument in favour of continuing deliberate rapid population growth. . . . Now there may be cogent arguments that these fears are exaggerated.”
    There certainly are. See my arguments, and others, in http://www.population.org.au – click population, aging.

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