If nothing else, the jobs summit will at least begin well today, with an excellent speech from Danielle Wood from the Grattan Institute, one that should be required reading not merely for summit attendees but every economist, commentator, journalist and politician opining on the summit.
From addressing education to expanding childcare to curbing industry access to and influence over politicians, Wood lays out a coherent set of challenges to lift productivity.
One thing notable by omission from Wood’s speech is any extensive discussion of migration — beyond urging us to do skilled migration smarter. That may sit rather oddly with what is purportedly one of the biggest issues at the summit for the media and business — increasing migration to 200,000 people a year.
The relative lack of discussion of migration in Wood’s speech is understandable given that the mooted increase will do little to address skill shortages and in fact will be likely to add to overall demand for labour as much as, or more than, it adds to supply.
For that observation we can also thank the Grattan Institute: last week Brendan Coates and Tyler Reysenbach published a paper explaining in detail why even substantially lifting skilled permanent migration wouldn’t help much.
What a 25% increase in migration would do — especially if coupled with a full-scale return of foreign students to higher education — is push house prices and rents up. Coates and Reysenbach estimated a 40,000 increase would lift rents by 5%.
In the hysterical campaign against Labor’s now-abandoned negative gearing changes in 2019, the Coalition, the property industry and most of the media uncritically ran “modelling” purporting to show rents would rise by 7-12% as a result.
So a 7% rise in rents justified a wild propaganda campaign against a crucial reform to end the bias of the tax system against first-home buyers, but a 5% rise in rents — based on far better independent research — is widely ignored in the clamour for more workers.
That’s how public debate works in Australia.
Labor’s tax changes would have increased housing affordability by ending the taxpayer subsidy for investors to purchase existing housing stock in competition with low-income earners and first home buyers. But more migration will also add to upward pressure on house prices.
And that’s why no one’s running any wild campaigns about the impact of migration. Renters are to be invoked only if it’s in the interests of property owners to do so.
Instead we’ll hear pronouncements about how it’s important that state governments make sure that housing supply increases to match the requirements of a return to high immigration. If anyone knows a state government that managed to do this, please let us know. Land supply, zoning and planning is everywhere caught up in Game Of Mates webs of influence and power aimed at maximising returns for developers.
That’s why the only certain winners from an increase in migration will be property developers and older Australians who already own property — or multiple properties — and will see demand for their assets surge further. Low-income earners and first-home buyers, as usual, will be left a distant second.
State governments will also enjoy more revenue from stamp duty, but it’s property owners who get the best deal.
One of the best aspects of Wood’s speech is that it meshes a set of issues that need to be dealt with as a whole, rather than piecemeal. For example, tapping into the productivity and growth gains to be had from greater female workforce participation requires more childcare and parental leave, which requires a greater, more skilled childcare workforce, which requires higher pay, which requires addressing entrenched gender biases toward caring professions. It’s complex, long-term stuff, but surely not beyond the capacity of intelligent policymakers.
But the reflexive increase in migration is a classic case of piecemeal thinking — of a kind that happens to benefit influential interest groups and powerful industries.
“given that the mooted increase will do little to address skill shortages”
Isn’t that an issue that business has caused for itself by being lazy and importing workers, rather than training workers themselves?
Thank you, Keane. Those overseas skilled workers can all move into the proposed community housing that the Feds and some of the States are building, ostensibly to ‘relieve’ the accommodation crisis. One of the golden rules of politics is never refuse property developers and land agents a chance to gouge the poor even further.
To increase the yearly migration by 200,000 is more than madness on many levels, we have a housing crisis in every State, where are these people going to live?the hospital system is crumbling along with education . It is morally corrupt to be poaching these skilled migrants from countries that have trained them and who need them more than us . I really do despair with this growth at all cost mentality as it will all end in tears.
The linkage is marginal compared with the artificial market support e.g. negative gearing, low interest rates, ever present property PR in media and religious word of mouth push prices well beyond real value.
At the moment, prices are returning to value, but the elephant in the room is, what’s stopping real value from starting to decline too?
Nothing will change as long as economists and think tanks still believe in the “trickle down economics” and that will not happen anytime soon. Yes there are some commentator trying to change the narrative but the ones that really count ie governments and big business don’t have the incentive to do so. You just have to look at “Labor” re stage 3 tax cuts. What government minister has stood up and stated that they cannot decide this matter as the have a fiscal interest in the result. Same with the negative gearing, superannuation and so on. Look at big businesses top tier and the wealth that falls into their lap.
Nothing will change while ever two thirds of the population are in their own homes – either paying it off or owning it outright – and addicted to watching their “asset” value grow. They even manage to convince themselves they’ve somehow earned the increase all by themselves by the sweat of their brow.
Homeowners mouth platitudes about how awful the housing affordability and rental crisis is, but the minute someone tries to do something concrete to address it, they sharpen their pitchforks and go ‘em. Rent seeking and hypocrisy reign supreme on the quarter acre block.
It would take a population inversion where two thirds rent to put enough pressure on our democratically elected representatives to change things. Perhaps the current generation of under 40s may supply that pressure, but enough of them will have access to the Bank of Mum and Dad or the Greater Bank of Grandparents, so probably not.
We’re on the fast track to a return to the time of Dickens or Ruth Park, where the working poor live in slums or are homeless. Advance Australia backwards. Such a proud achievement.
Great piece.
How much of the “agreed upon” increase in immigration was thrashed out with the vested interests prior to the election?
Needless to say the government didn’t see fit to discuss the issue during the campaign.
The fact that the other mob are somewhat less terrible doesn’t offer a free pass.
Honourable mention to the Greens. Those great environmental stewards who have SFA to say about rapid fire population growth despite its catastrophic implications for our fragile ecosystem.
Thanks a whole bunch Adam.