Are there hidden costs to high immigration?
by John Daley
Published by The Sydney Morning Herald, Wednesday 18 April
Australia is more defined by migration than almost any other country. One in four Australians wasn’t born here; one in two has a parent born overseas.
But public concern about this migration is growing. More people are asking whether you can have too much of a good thing.
The big issue is not Australia’s permanent migrant intake. It’s the number of temporary migrants that’s growing fast. But this label is somewhat misleading: many “temporary” migrants live in Australia for more than a decade – and often ultimately become permanent migrants and citizens.
Nor is the big issue Australia’s total migrant intake. It’s the numbers moving to Melbourne and Sydney at record levels, so that Melbourne’s population is currently growing at almost 3 per cent a year.
There are benefits. Migration has raised Australia’s annual GDP growth by about 1.5 per cent over the past decade. That helps companies whose profits and revenues often grow in line with GDP. And it makes the numbers look good for governments keen to avoid the stigma of a recession.
But much of this doesn’t help people already living in Australia. They only benefit from higher GDP per capita. Migration has helped here too – by the more modest rate of about 0.4 per cent per year. As shown in a Treasury and Home Affairs paper released on Monday, migrants tend to be younger than the existing population, and so they are more likely to work. They tend to be more skilled, and so more productive. Inherently they tend to have a lot of “get up and go” – because by definition they have already got up and gone. And they contribute to Australia’s cultural diversity and resilience.
The benefits of migration have increased over the past 15 years. The Howard government shifted Australia’s migration intake towards younger and more-skilled migrants. There are now fewer family reunion migrants, and most of them today are partners rather than parents. Many of the extra temporary migrants are students who both contribute to Australia’s exports, and then contribute to the economy as relatively well-trained workers.
But these economic benefits need to weighed against the costs. We don’t need to worry much about “migrants taking our jobs and reducing our wages”. Both in Australia and overseas, skilled migrants tend to increase the percentage of the population who work, and they tend to push wages up.
Instead, the big costs are higher housing prices, and more traffic congestion. If the population grows quickly, and housing construction doesn’t keep up, then higher prices are the inevitable result. The costs are not borne equally, as we showed in our recent report, Housing affordability. Higher house prices and rents are good for old people planning to sell. They make little difference to those who have already committed to a mortgage for the next 25 years. But high prices are unambiguously bad for younger households. It’s no surprise that home ownership is falling for those who are younger and on lower incomes.
This doesn’t have to be the case. Australian cities are sparsely populated by world standards. There’s plenty of space for subdivision. But people only like more density in the suburb next to theirs, and consequently their children cannot afford to buy a dwelling.
Similarly, more people doesn’t necessarily mean more traffic congestion. We would do better if we focused on the transport projects with the most benefits, rather than whatever takes a politician’s fancy in the lead-up to an election. And congestion would be less of a problem if we charged people more to drive on roads or ride on trains when they are congested – and nothing when they are not.
But if states aren’t going to get planning and transport policy right, then migration imposes real costs. If states don’t get the policy right, then the Commonwealth should at least consider tapping the brakes on migration.