NSW Premier's 2 million immigrants plan 'horribly misguided': economist

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Image of a crowd at Bronte Beach, image of NSW Premier Dominic Perrottet in mask
NSW Premier Dominic Perrottet's plan for 2 million immigrants in 5 years is "lazy", "irresponsible" and needs to be shut down, says independent economist Stephen Koukoulas. (Source: Getty)

It was truly a shocking revelation that the New South Wales public service is urging Premier Dominic Perrottet to push for an ‘explosive’ level of 2 million immigrants over the next five years.

It appears that Perrottet has embraced this advice by saying he wanted a ‘big NSW’ and will push his counterparts in the Federal government to implement this a massive population shock to the economy.

To be frank, the proposal is a lazy, irresponsible and a horribly misguided recommendation that deserves to be shot down before significant damage is done.

It is a proposal that has obviously not been thought through given such a scheme would crush the wages growth, and add massively to congestion especially in the cities including Sydney.

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It would underpin a surge in demand for housing, add to pressure on already stretched infrastructure and speed up environmental degradation.

What’s more, high immigration does nothing to enhance productivity, tackle the existing problems with the skill and education levels of the existing pool of unemployed and underemployed. Nor does it address the pressures on an already hot housing market.

Think about this for a moment.

The fabulous city of Perth has a population of just over 2 million people. Think of all the houses, roads, schools, shops, offices, hospitals in Perth, all of which are supplied with water, electricity, sewerage and other services.

At one level, the 2 million immigrant proposal would mean that a city the size of Perth would need to be built in just five years to make sure there are no additional pressures on existing services if the living standards of Australians are not to be compromised.

This is not possible.

At another level, the flood of workers would skew wages lower. When there are close to 2 million Australians either unemployed or underemployed who are currently finding it difficult to get a job, an extra 2 million people to compete with will not only be difficult for those at the margin of the labour market, but it will skew wages growth lower.

The recent experience, with international borders largely closed due to COVID-19, skills shortages have emerged in some sectors of the economy. This is code for the unfolding of upside wage pressures as firms inevitably compete for scarce workers.

Wages growth has indeed picked up as a result, and if immigration levels remain subdued, even as we learn to live with COVID, those wages pressures would build further.

This is a good thing and is the aim of the RBA with its current stance on monetary policy.

SYDNEY, AUSTRALIA - OCTOBER 12: People walk in front of the Sydney Opera House after stay-at-home orders were lifted across NSW, in Sydney, Australia, Tuesday, October 12, 2021. Having surpassed the 70 per cent double-dose vaccination milestone early, gyms, cafes, restaurants, pools, shops, hairdressers and beauticians will reopen in NSW from Monday. (Photo by Steven Saphore/Anadolu Agency via Getty Images)
"Australians love and embrace immigration, but only in moderation." (Photo by Steven Saphore/Anadolu Agency via Getty Images)

Australia needs 'sensible' immigration. Here's what that looks like

Of course, some immigration is vital for an economy like Australia’s, but like good red wine, too much can cause problems.

Australia needs to play its part with a strong humanitarian immigration program, and a moderate amount of well-targeted skilled migrants is important too.

In total, an annual figure around 100,000 would seem sensible, as it would not blow up existing infrastructure and the housing sector would be well placed to meet the demand from the new arrivals, with solid levels of new construction over the medium term.

This would see the 2 million target for immigration achieved over 20 years or so, a timeframe that would not impose major dislocations on housing, infrastructure and the environment, to name a few.

The level of immigration is a critical economic issue. But for many years, it has not been adequately debated by those who influence policy makers who decide the number of people allowed to immigrate in Australia.

The Federal election will be held within the next few months. It is to be hoped that immigration is a key issue and its effects are fully understood by the electorate as they cast their vote.

Australians love and embrace immigration, but only in moderation.

The side of politics that advocates an ‘explosive’ level of immigration must explain the full effects of their strategy.

Voters look to be well enough informed to shy away from this approach and it would no doubt cost votes.

A slow reopening of borders is undoubtedly the best approach to immigration and the political party that embraces low immigration levels will likely be on a winner.

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