The Abbott Prescription

Australian politics is at a low ebb for many reasons but one is our tendency to tell other people how to do their jobs rather than to get on with our own.

A classic instance was the Queensland premier’s recent demand for a national approach to anti-bullying in schools. But unlike Queensland, the federal government does not run a single school. And only in a debauched political culture would it be up to government – rather than school principals, teachers, parents and, in very severe cases, the police – to tackle bullying in the playground. This was an obvious and particularly crass case of virtue signalling: the Queensland premier wanted credit for being against bullying without actually doing anything at all to deal with it.

Another instance is the federal government’s National Energy Guarantee. It sounds wonderful. Both prices and emissions will fall and the lights will stay on. We just have to rely on the experts at the Australian Energy Market Operator and at the Energy Security Board to tell us how it’s done.

Now, none of you came here tonight to hear slogans like “stop the boats” or “scrap the tax” or “build the roads” – let alone “build the wall” or “drain the swamp” – but I’m sure you’d prefer to hear how your everyday issues might actually be addressed, rather than get much-ado-about-process, or buck-passing and blame shifting to another level of government.

Listen to just about anyone in authority these days and this is what you’ll hear — a lot of glib talk that boils down to saying: ‘We’d like to fix this problem but it’s very complicated and if nothing changes it’s someone else’s fault.’

All too often, it seems, the people charged with sorting out our difficulties don’t have to suffer them; or, at least, not to the same extent as the general public. It’s easy to be relaxed about green-scheme-driven price hikes when you’re on a big salary. It’s easy to dismiss street crime when you live in an up-market suburb and don’t have to use public transport or drive long distances for work.

Hence the insiders-versus-outsiders chasm now bedevilling the politics of the West: a talking class that’s never had it so good; a working class that’s trying harder and harder just to keep up; and a welfare class with a strong sense of entitlement.

There is something fundamentally wrong when a country with the world’s largest, readily available reserves of coal, gas and uranium has some of the world’s highest energy prices; when a country with so much space has big city property prices rivalling London and Hong Kong; and when some of the world’s best-funded schools have test results on a par with Kazakhstan.

To be Australian is still to have won the lottery of life. We have so much going for us. But again and again we have allowed green religion, a largely misplaced sense of guilt, and a chronic aversion to giving offence to cripple our public discourse; to the point where we go round and round in circles rather than make changes that really will tend to get wages up, power prices down and traffic flowing again in our big cities.

How can the world’s largest exporter of coal, for instance, have let political risk make the construction of new coal-fired power stations all-but-impossible? Our emissions obsession has made coal taboo, so policy makers pretend that a combination of wind and gas generation can keep the lights on and prices down even though most states are making further gas production almost impossible.

But my main concern tonight is another topic, no less taboo, lest anyone be upset or comfort be given to the racists supposedly in our midst, namely the rate of immigration. I first raised this early last year, have been looking for a chance to say more ever since, and am pleased that I’ve finally been able to take up the Sydney Institute’s invitation to speak.

As someone born overseas, I could hardly be against immigration. From our beginning in 1788, modern Australia has been an immigrant society. Immigration is at the heart of who we are. The fact that so many millions have come here to build a better life, originally from the British Isles but then from the four corners of the earth, lends a heroic dimension to our national story.

Late last year, I went to an aged-care Christmas party in my electorate. In the traditional costumes of their homelands, for their patients the staff had put on a concert. Their pride in Australia and their gratitude was as palpable as the service that these new Australians were rendering to the old.

While a former PM was talking policy and hard choices, the man who knifed him
wore a supercilious grin as his wife prosecuted their vendetta on 60 Minutes.
Skip to the 10.40 mark for some of the bitchiest observations since the last
squadron of Mardi Gras drag queens sailed down Oxford Street. — rf

So making immigrants feel unwelcome in their own country is the last thing we need. Immigration has been overwhelmingly and unquestionably good for Australia; as well as good for the immigrants who have voted with their feet to live here.

My issue is not immigration; it’s the rate of immigration at a time of stagnant wages, clogged infrastructure, soaring house prices and, in Melbourne at least, ethnic gangs that are testing the resolve of police.

It’s a basic law of economics that increasing the supply of labour depresses wages; and that increasing demand for housing boosts price. Such is the unreality of our political discourse, though, that amidst great concern about unaffordable housing and stagnant wages, no one on the front bench of government or opposition had been prepared to raise the one big contributing factor that is wholly and solely within the federal government’s control – until Peter Dutton finally said last week that immigration could be cut “if it’s in our national interest”.

Instead, federal politicians have demanded that the states boost housing supply; we have urged employers to lift wages and even promised company tax cuts – Senate permitting – to make this more affordable. But the one policy lever that is least subject to interference by the states or by the senate remains strangely untouched.

It’s the federal government that sets the annual quota for how many permanent entrants will come in the “skilled”, “family reunion” and “refugee and humanitarian” categories. It’s the federal government that sets at budget time an annual migration target. It’s the federal government that sets the rules governing two and four year visas for the foreign workers that businesses say they need. And it’s the federal government that sets the rules governing the overseas students that universities want with the right to live here and then work towards professional qualifications in this country.

Migration, you see, isn’t just the number of permanent visas granted in any one year. It’s all the newcomers looking for jobs and housing and that includes many on business and student visas too.

Prior to 2003, the number of long-stay business visas never exceeded 40,000 a year. Since 2007, it’s mostly exceeded 100,000.

Prior to 2005, the number of overseas student visas never exceeded 200,000. Since 2007, they’ve always exceeded 250,000 and often 300,000.

What this means is that the figure for Net Overseas Migration (or the extra people looking for housing and jobs) that had averaged 110,000 a year in the decade to mid-2006 has doubled to 220,000 a year in the decade since – peaking at well over 300,000 under the Rudd prime ministership. These are by far the highest figures in our history.

Even at the old rate to the mid-2000s, on a per capita basis, our immigration was still about the highest in the developed world. At the subsequent and current rate, every five years, we’re letting immigration alone increase our population by about the size of the city of Adelaide.

Just 16 years ago, in the first Inter-generational Report, it was expected that our population would not reach 25.3 million till 2042. But due to current immigration levels, we’re going to achieve that figure next year – or 23 years early.

So far, our main strategy to cope has been urban infill: putting more and more people into suburbs whose schools are full, roads are choked and public transport over-crowded.

Now, over time, a bigger population has benefits, with a larger and more dynamic economy. Over time, highly skilled migrants should increase productivity in ways that lead, eventually, to more jobs and higher wages. In the short term, though, more competition in the labour market puts downwards pressure on wages and makes it harder for any individual to find work. In other words, what should be good overall in the long run can be quite hurtful in the short run.

Australia’s relatively subdued economic performance over the past decade is due to post-GFC headwinds, the fading of the China boom, more competition from third-world-countries-with-first-world-technology, disruption to established industries, and our own home-grown policy follies such as the carbon tax.

It can’t be pinned on too many or the wrong type of migrant. Indeed, high immigration has been a factor in Australia’s record-breaking run of aggregate economic growth because each new worker adds to our economy – but behind the reassuring overall figures, growth-per-person tells a different story. At just 0.9% over the past decade, annual economic growth per person has been anaemic, compared to 2.4% during the Howard years, when immigration was much lower.

Over the decade to mid-2007, 2.1 million new jobs were created while net overseas migration totalled 1.2 million. In the next decade, by contrast, just 1.8 million new jobs were created while net overseas migration almost doubled to 2.2 million. So it’s not surprising that, for much of this time, jobs have seemed harder to find and that more and more foreigners seemed to be filling them.

If a high-end restaurant needs an executive chef, or if a university needs a world-class quantum physicist, or if a bank needs a new CFO, it might make sense to recruit someone from overseas on a high salary; and it’s good when people making a big contribution opt to stay here. But are we really so short of willing and capable workers that backpackers must pick our crops, overseas students serve our tables, and recent migrants run our IT?

Very possibly Australians are too fussy about the jobs they’ll do, or even whether they’ll work at all given the availability of don’t-ask-questions welfare. But if it’s hard to find café or cleaning staff, maybe higher wages would help and maybe the welfare rules should be better policed. If it’s hard to find programmers, maybe companies need to do more training. And if no decent managers are available, maybe their pay might have to be increased – because that, after all, is how markets should normally work.

Skilled occupations eligible for two- and four-year visas currently include accommodation managers, accountants, advertising managers, agricultural technicians, air-conditioning mechanics, aircraft engineers, animal attendants, arborists, and art teachers – and that’s before proceeding beyond the first letter of the alphabet! With more than 400 occupations on the list, there are few jobs that can’t be filled by foreigners when locals don’t find the wage attractive.

Of course, people who come to this country to work and pay taxes from day one undoubtedly make great Australians, should they stay. But should it really be so easy to fill jobs from overseas rather than offer the better training or higher wages that locals want?

It’s hard to avoid the conclusion that temporary skilled visas have been a factor in allowing Australian business to neglect training and to keep wages down. You can hardly blame them given the compliance burdens and sky-rocketing costs they face, but it’s not a smart long-term way to keep a high-skill, high-wage first world economy.

Since the late 1980s, Australian house prices have been rising at well above the rate of inflation. Much of this is due to lower interest rates enabling buyers to pay more without increasing their repayments. But especially in the past decade, higher immigration has boosted demand and factored into price. Almost half a million new dwellings have been required over the decade just to meet the increase in net overseas migration.

Then there’s the integration question. As the head of the Menzies Research Centre observed last week, “something has gone badly wrong with our resettlement system when 58% of refugees who have settled here in the past ten years are living on welfare”. With no insistence that refugees learn English, it’s hardly surprising that only 30% of the last decade’s intake are proficient; but without the national language how can newcomers ever really find a job and fully integrate into our way of life?

Again, let me stress, I want a stronger Australia; and, over time, that should be a bigger Australia. But no Australian government should put the well-being of potential incoming migrants over that of the existing population. The programme has to be managed primarily in the interests of today’s Australians, not primarily in the interests of those who want to come here despite the contribution that many could undoubtedly make.

My government oversaw a decline of about 30,000 in annual net overseas migration. As well, we toughened up the rules against foreign purchases of existing residential properties – and actually enforced them for the first time – to give locals a fairer go in the housing market.

We began the biggest boost to roads in our history (with public transport included via an asset recycling programme with the states) in order to tackle a 30 year infrastructure deficit as quickly as possible. Taxes and regulations were cut to boost the economy and facilitate higher wages for Australian workers. And stopping the boats meant that the Australian government, not people smugglers, was once more running the humanitarian intake and we could prioritise persecuted minorities like the Christians of the Middle East.

But since then, net overseas migration has again edged up. And wage growth is still low, housing is still out of reach for young Australians, congestion is getting worse, and gang violence in Melbourne shows no sign of abating – so we need a rather bigger reduction now than we were able to deliver then.

There’s no reason why we must maintain the additional humanitarian immigration for the Syrian war that’s now winding down, or maintain that negotiated as part of a Senate deal. There’s no reason why we shouldn’t insist on fluency in English as a requirement for citizenship, as the government is doing, or further revise “temporary” skilled immigration to require higher pay, higher skills and more effort to find local workers first.

At least until infrastructure, housing stock, and integration has better caught up, we simply have to move the overall numbers substantially down. A strong migration programme in the long term doesn’t preclude a smaller one in the short term especially when there’s acute pressure on living standards and quality of life.

The Howard government cut migration numbers by 30% in its first two years. Of course, it would be unfair to would-be immigrants and would-be employers of skilled staff to change the rules for people already here or currently in the visa pipeline. Managing the overall numbers down to the old long-term average of 110,000 a year would inconvenience some businesses but that’s hardly unreasonable if it helps wages to grow more strongly and makes homes more affordable.

In order to win the next election, the government needs policy positions which are principled, practical and popular. And if they also outrage the Labor Party, so much the better!

Scaling back immigration acknowledges that government’s first duty is to its own citizens. It would be an act of the executive that doesn’t require tortuous negotiation with the states or the Senate crossbench. And since when is a democratic government required to ignore voters who would overwhelmingly prefer less immigration to more?

This could have been tackled sooner; so I do hope that Minister Dutton’s hints last week might quickly become a welcome change of scale.

This address was delivered at the Sydney Institute on the evening of February 21, 2018.