Submission to the economic and finance committee, parliament of SA
6 November 2018
Submission to the Economic and Finance Committee, Parliament of SA
This submission addresses clause (a) of the committee’s ToR, ‘The impact of migration and population growth on SA’s productivity and economic performance’, and makes further comment in response to clause (g) ‘any other relevant matters’.
(1) Measuring economic performance
There is a growing body of literature and commentary around the world questioning the assumption that continual growth as measured by GDP is worthwhile. Indeed, there is a good case for the argument that past a certain point economies like ours can experience ‘uneconomic growth’.
To understand the point being made here one has to look more closely at what standard measures like GDP are actually reflecting. In reality GDP measures and sums the dollar value of every transaction in goods and services made in an economy over a set time, normally a year. No judgement is made about the quality or value or purpose of those transactions. For example, the costs incurred in treating people made physically or mentally ill by the stress of modern living are all counted as a positive addition to GDP. The same applies to repair costs of car crashes or the costs of storm damage, or the price of litigation or running prisons. There is no negative side to the GDP balance sheet.
Similarly, no quality distinction is made between the vast amounts spent on advertising and that spent on education. The money spent on childcare by young families forced into being a time-poor two-income family all adds to GDP.
At the same time no value is ascribed to voluntary work, nor to the childcare services provided free by older family members.
Equally serious is the fact that no account is taken of the run down of ‘natural capital’, that inheritance of natural resources from earlier generations. Neglect of our stewardship responsibilities there simply does not appear in GDP. Overuse and degradation, leading to biodiversity loss for instance, does not register at all in this economic measure.
However, if we choose other, more realistic measures of our economic performance, especially if we include measures of environmental impact and human wellbeing, we start to get a different story. It is entirely possible that if we sum the true costs of the next increment of growth that at some point they will exceed the positives. At that point we will have reached ‘uneconomic growth’. Some argue that we have already passed this point.
(2) Using population growth to drive economic growth
This argument is relevant to migration because governments in Australia have long used migration as an engine to achieve economic growth as simplistically measured by GDP. The current PM is quite open about this. He, and we suspect most, politicians remain unaware of the gross assumptions made by economists that enable them to continue to claim that continual GDP growth is good, and thus a high level of immigration is also good. The appeal to Australia’s fine tradition of welcoming immigrants is commonly a phony appeal made by those who seek to profit most by business as usual with its high rate of immigration. That is why the building sector and the big banks and others well positioned to profit most easily from simple growth are amongst the greatest supporters of high immigration.
This contrasts with what repeated public surveys are telling us, namely that over 70% of Australians do not want ‘a big Australia’. Most people have an intuitive understanding based on their own experience that continual economic and population growth does not necessarily improve their own lives, even though our cities may be much larger. It is worth noting that Australians have long ago decided to have small families, a development that would naturally lead to a stable population were it not for policy settings to counter it.
We point to several reports from the Australian Productivity Commission that have questioned the real economic value of the national program to boost the population.
In 2006 the Productivity Commission wrote: (Economic Impacts of Migration and Population Growth, April 2006, p. xxii)
. the Commission considers it unlikely that migration will have a substantial impact on income per capita and productivity because:
- the annual flow of migrants is small relative to the stock of workers and population
- migrants are not very different in relevant respects from the Australian-born population and, over time, the differences become smaller.
The same report makes the following comment on the results of a modelling exercise with a high rate of immigration (box 8.3. p. 81):
The gains in income from increased migration were not evenly distributed.
– Most of the gains accrued to the migrants themselves, with the average incomes of incumbents declining slightly.
In December 2010 The Productivity Commission published another report ‘Population and Migration: Understanding the Numbers’, Research Paper, which offers the following summary (p.75):
- While population growth is likely to increase aggregate gross domestic product (GDP) and gross national income (GNI), more relevant measures are per capita income and, ultimately, community wellbeing.
- The impacts of immigration growth on GDP and GNI per head of the existing resident population are ambiguous and depend on the source, composition and context in which the growth occurred.
- Population growth and immigration (its main source) can magnify existing policy problems and amplify pressures on ‘unpriced’ entities, such as the environment, and urban and social amenity.
- The impacts of population growth and immigration are unlikely to be evenly distributed across Australia’s population — there are likely to be both winners and losers.
Neither of these reports is a ringing endorsement of a blanket policy of continuing high immigration. Note that the second report acknowledges the importance of non-economic, unpriced factors, such as the infrastructure deficit, the pressure on water resources and the social stresses and inequalities that accompany urban sprawl.
It is also worth looking at a widely used non-GDP measure, the Genuine Progress Indicator, which attempts to assess ‘human wellbeing’. By this measure there has been virtually no net improvement in Australia since the mid 1970s. This is a well regarded and internationally respected index that we should not dismiss simply because its results question the value of endless growth to ordinary people.
Indeed, with so much clear evidence that we are now placing excessive demands on our environment, at the local scale as well as globally, we are convinced that our preoccupation with growth is a serious mistake.
If the main argument for high immigration is to secure more economic growth as we currently measure it, then we the public are simply being used by vested interests for their own short-term benefit. Worse still, those interests have little understanding or concern about how growth is degrading our natural resource base. Yet for many citizens, the wise stewardship of nature and the conservation of resources is a primary responsibility in life, perhaps indeed the most valuable contribution we can individually make to community in our lifetime.
We do not need to grow our population in order to thrive. That is a fallacy, abundantly clear to anyone who has visited Norway, Sweden, Denmark, Finland, Switzerland, Italy, France or Japan, to name a few advanced economies with little or no population growth.
The formula of endless economic and population growth is not improving the lot of ordinary people, however much it benefits the few.
The road to genuine sustainability entails abandoning the assumption that endless growth in numbers and consumption is good. It means looking seriously at creating a ‘steady state’ economy that is focused on quality not quantity. That will involve stabilising our population and overall consumption of resources as soon as possible, and not seeking to grow them further.
Indeed, we shall have to reduce total consumption substantially to play our part in the global reduction of carbon emissions in the near future. That necessary contraction could well be reflected in a reduced GDP in future. A smaller population would assist us make a real contribution, while a growing population can only assist by making deep cuts in consumption and emissions per capita.
Our view is that we should be seeking as a matter of urgency ways to stabilise our population, both at a national and state level. If that means winding back our immigration programs then so be it. With some tens of thousands of Australians moving overseas every year, we would still be able to offer places to thousands of needy refugees on an annual basis without growing our population further.
As a jurisdiction SA needs to understand the nature of the necessary changes ahead, and work towards their facilitation. We will not thrive by adhering to the damaging and ultimately counter-productive doctrine of endless growth. Growth is the problem, not the solution. Future generations will not thank us for putting the quality of our lives and our environment such a poor second to ‘economic growth’. Finally, with mPeter Martin,ost of the extra income generated going to the already well off, the social licence for such growth has long since evaporated.
We can do much, much better than ‘business as usual’, and we urgently need to.
Peter Martin, Port Willunga
Sandra Kanck, Prospect