Population posturing

In January this year the Commonwealth Treasury released its Intergenerational Report for 2010. First introduced by former Treasurer Peter Costello, the IGR looks at long term trends in Australia’s population, particularly the rate at which it ages, and examines the implications for long term public policy making. A small and normally innocuous Treasury prediction was included in this report - that at current rates of growth, Australia’s population was likely to reach 35.9 million in 2050.

This prediction marked the beginning of a spirited public debate which has already resulted in the Coalition promising to cut migration, and forced the Rudd Government to appoint a Minister for Population.

Like free trade, higher population and migration are not always politically popular, but are strongly supported on economic grounds. Until recently, a bipartisan consensus existed to support higher migration, and the Coalition’s decision to break that could damage its economic credibility.

If you listen to many politicians and commentators, you would be forgiven for thinking that migrants, and Australian families having more children, are responsible for almost every public policy failure in modern Australia. ALP backbencher, Kelvin Thompson, thinks that more Australians means “environmental devastation, rising interest rates, and unaffordable housing” (“Population growing at twice global average: ABS”, The Sydney Morning Herald, March 26, 2010).

Dr Deborah Pelser, in the Medical Journal of Australia, warns that increasing levels of migration will lead to higher rates of schizophrenia as well as “heart disease, diabetes, chronic neck and back pain, asthma and migraine” and of course “a greater likelihood of being overweight or obese” (“Huge Australian population growth could have grave health consequences”, Herald Sun, April 13, 2010).

The Prime Minister, Kevin Rudd, names urban congestion, housing supply, lack of water and pressure on government services as potential results of a “Big Australia”.

Recent published opinion polls show a high degree of concern and opposition among Australian voters to population growth and immigration. The Australian Survey of Social Attitudes found this year that 69 per cent of respondents said they did not think Australia needed any more people (“Majority oppose population growth: survey”, The Age, April 14, 2010).

A Morgan poll in April found that more than 80 per cent of Australians wanted levels of immigration to be reduced or remain at current levels. An AC Nielson poll, also in April, found 54 per cent of Australians thought our current immigration levels were too high, and 51 per cent believed that a predicted population of 36 million in 2050 was too high. Similarly, a recent Lowy Institute Poll found that more than two-thirds of those surveyed do not support an Australian population of 36 million by 2050. An Essential Research poll in March found that 58 per cent of Australians thought we did not have the “space and resources” to cope with a larger population, and 52 per cent disagreed with the proposition that a larger population was better for economic growth.

While these figures have recently increased, opposition to higher levels of migration and population growth is not a new phenomenon in Australia. Australians have always expressed a degree of uneasiness about immigration levels and population growth. For most of the 1950s, more than 80 per cent of Australians stated they wanted immigration to remain the same or be reduced (Roy Morgan Research). In 1977, 50 per cent of Australians said they did not want higher population. This rose to 61 per cent in 2001 (“Population growth: what do Australian voters want?” (PDF 272KB) People and Place).

But these attitudes did not stop Australia’s population increasing from little over 8 million in 1950 to more than 22 million in 2010. Nor did it stop the Howard government presiding over a major increase in migration. From 1996 to 2007, the permanent migrant program doubled in size (Andrew Norton, April 6, 2010). The Howard years also saw major increases in temporary residents, including students and temporary workers under the 457 visa program. Australia’s population, just over 18 million when Howard took office in 1996, stood at over 21 million when he left office in 2007.

The former Coalition Government did not only rely on migration to increase population, however, with the Treasurer’s famous exhortation for mums and dads to do their bit for Australia by having three children, as well as policies such as the baby bonus to provide a financial incentive for a natural increase in population.

It is not surprising the Howard government opted for higher population, because the economic case for a “Big Australia” is very strong. On a simplistic level, one need only look at the rates of population growth in Europe’s stagnating economies like Greece and Spain to see the risks to economic prosperity of perilously low population growth.

Yet this also holds on a more empirical level - more than 40 per cent of the increase in Australia’s GDP over the past four decades can be attributed to population growth (“Population growth, a mixed blessing”, On Line Opinion, May 3, 2010). The consequences for Australia’s economic future from a reduction in population growth are clear. As the IGR notes, even a moderately slower rate of growth and a population of 30 million in 2050 would produce a real GDP 17 per cent lower than with a population of 36 million. A slower rate of population growth will also increase the burden on working-age taxpayers. Already, the ratio of working age adults to adults over 65 who need to be supported is expected to fall from 5:1 today to 2.7:1 in 2050. A lower rate of growth which resulted in 30 million Australians would see that rate fall to 2.3:1 in 2050, imposing a much higher taxation burden on a smaller group of income-earning employees in the future.

That the Howard government was able to preside over a major increase in migration despite public concern is no accident. Other than xenophobic campaigning by some unions against foreign workers, and racially motivated attacks on migration early in Howard’s term in office from groups like One-Nation, population policy remained a relatively uncontested policy area in the political arena. Indeed, a bipartisan consensus was largely maintained for a strong growing population and ongoing immigration throughout the Howard years.

There are some policy areas where the general population holds strong views that are not shared by experts nor reflected in policy. Free trade is perhaps the most commonly cited instance. In Australia, a majority of voters routinely express protectionist attitudes, despite the fact that economists overwhelmingly believe that protectionism is economically damaging. By and large, Australia has enjoyed a bi-partisan consensus in support of more open trade, despite community concern (“The Politics of Protection: America and Australia Compared”, Policy, Spring 2008). The deregulation of the Australian economy that took place during the 1980s and 1990s, including floating the dollar, privatisation and deregulating the finance industry, were measures that rarely won voter approval. But to the Liberal Party’s great credit, it largely supported these reforms, particularly when John Howard was Opposition Leader in the 1980s. Howard knew that these reforms were important for Australia’s future and declined the opportunity to resort to populism.

Until recently, migration and population growth was in the same category. The Coalition’s decision to attack the Rudd government on population was probably good short term politics - it tapped into existing community concerns and it certainly caught the ALP off guard as evidenced by Rudd’s rushed appointment of Tony Burke as Population Minister.

But the Coalition is now in the unenviable position of advocating a policy direction which could lower Australia’s future GDP by up to 17 per cent. The party of smaller government and lower taxation is suggesting that an even bigger burden should fall on an even smaller number of working-age taxpayers to support Australians in retirement. Laying blame at the feet of migrants for Australia’s housing shortages, infrastructure bottlenecks and water scarcity also gives a free pass to the failure of successive State Labor Governments to invest in infrastructure and adequately supply the services their residents require.

The Coalition lost its lead as the better party to manage the economy in Newspoll for the first time in years of survey data in March 2010. Even when the Coalition lost power in 2007 it posted strong margins over the ALP on economic management, and it was rightly identified as one of the main strengths of the former government. Undoubtedly, the benefits of incumbency have boosted the ALP’s polling in this area, and Barnaby Joyce’s time as Shadow Finance Minister, which was criticised in the media, immediately preceded the poll. Newspoll has not asked this question since March, and the ALP’s recent period of bad polling may have reversed this finding. With their backs up against the wall, the Government is now trying to paint Tony Abbott as a risk to Australia’s future, and is continuing to characterise Abbott as reckless, irresponsible and disinterested in economics.

If the Coalition hopes to regain and maintain its long-held lead in this polling area, it should start by discarding its populist and economically dubious position on population. Even if migration and higher population - just like free trade, and other areas of economic liberalisation - are electorally unpopular, the Coalition should stand on principle and support what is best for the Australian economy, just as John Howard did.