Cutting immigration will hurt not just housing, but the entire economy
As we look to what's ahead for 2012, Property Observer is republishing some of our most noteworthy stories of 2011.
Sadly, both parties, initially led by the Liberal Party and quickly followed by Labor under Julia Gillard, have opted for Little Australia. For generations, both political parties have done the right thing by Australia on population. They have strongly supported high immigration despite great reluctance from voters for it. Big Australia makes sense.
Cutting migration means higher interest rates in the short term and higher taxes in the long-term as our population ages. As for house prices, well, don’t expect them to grow much, if at all. House price devaluation is a more likely outcome if we adopt Little Australia.
A smaller population growth means lower productivity. In order to maintain our standard of living – assuming lower migration – we will have to work longer (and smarter) plus raise taxes. Working smarter is a noble aim, but it takes a long-term view; real short-term pain; and genuine investment in education and infrastructure. Think the East’s commitment to such, not the West’s. I don’t want to sound like a cynic, but I don’t think Aussies are up for this challenge. Every time I get behind a “Sustainable Australia” or “Australia is Full” sticker on an RV, I just chuckle and mutter “hypocrite”. My wife and children, I must add, are getting pretty sick of it.
But the economic argument isn’t the only rationale for maintaining high immigration. There’s a strong moral case too. Nearly all Australians are the children or descendants of immigrants. A deep cut in immigration is inter-generational opportunism on our part, in effect denying to future immigrants and their children the advantages that we ourselves have enjoyed. I also don’t think the world will allow it.
And as for the environmental squabble, well, let me say that if America and Canada can do it, then we can too. Yes, we have a more sensitive environment than the Americas, but long-term planning plus a regional approach will overcome most issues. Did you know that only a handful of US cities are bigger than Sydney, Melbourne or Brisbane? Most of their population lives in regional centres, many of which are under 500,000 people. We now need to do the same.
On that note, Ken Henry gave the best contribution to the population debate so far, when he said that the first step around regional population imbalances was to address the range of areas where economic growth is being constrained, often at a local level. Henry correctly nominated water in addition to the more frequently nominated areas of infrastructure. But it also applies to housing, where approval processes are an important constraint on the market responding to growing demand. Throwing money at the problem, vis-à-vis Labor’s $225 million quick fix pledge to 15 regional cities, is a Band-Aid solution to much deeper wounds. Regional Australia needs major surgery, not ointment and a gauze wrapping.
The Little Australia advocates want to preserve Australia in amber, to prevent it from ever-changing. Why? Because change is threatening. We need leadership now, not spin. Many of us are hungry for it. My mate Bernard Salt summed it up well in The Australian when he lamented our incredibly sparse population and the low-quality debate to which our leaders are subjecting the nation.
The cowardly retreat from immigration by both major parties is a policy disaster of the first order. And it’s one for which future generations of Australians will pay.
Michael Matusik is the director of independent property advisory Matusik Property Insights. Matusik has helped over 500 new residential developments come to fruition and writes the weekly Matusik's Missive.
Photograph by Phillip Capper
