I have been inspired to add my twenty cents worth in favour of well-balanced, strong population growth by the recent contributions of Michael Fullilove and Andrew Leigh who, in different ways, have refreshed the national discussion on Australia's population growth.
There is also inspiration in a negative sense. We need as many voices as possible to move the population debate well clear of the unedifying spectacle we saw last year when migration became entangled in refugee policy. As Andrew Leigh pointed out, it is clearly important to separate the two debates.
For Fullilove, a larger population is seen as one element in Australia becoming bigger in a number of senses: via our economy, our demography, our influence, and in our approach to the world. After his careful weighing of many of the arguments about the economic impacts of immigration, Leigh came down on the plus side while questioning many of the arguments on both sides of the debate.
In this contribution, I suggest that some of the major benefits to Australia from strong immigration arise because it makes us more dynamic.
Immigration means we renew our workforce, our entrepreneurship, our talents, our diversity and our capital stock more rapidly than we would otherwise. This brings important benefits – both economic and non-economic. I want to emphasise that to derive the full benefits of stronger immigration, and indeed to help overcome some major sources of domestic dissatisfaction with immigration, we need to stop under-investing in education, skills development and infrastructure.
Somewhat more than half of our current population growth comes from net migration. Indeed, given that our total fertility rate has been well below replacement levels for almost four decades, in the absence of immigration we would be looking to join the likes of Japan, Germany and Russia as countries with declining populations.
One of the impacts of strong immigration is that it injects additional mobility into our labour market. Most immigrants come with a keen eye for job opportunities. Many come with an eye on a specific job and some with a promise of a position that has not attracted local candidates. New immigrants are demonstrably more footloose than the resident population and they travel more readily to where the jobs are. This helps reduce the impact of the traditional frictions that operate in labour markets; frictions that in Australia are magnified by our vast internal distances. In the absence of this additional labour mobility, we would be less responsive to shifting opportunities.
Immigration also assists us to more rapidly replenish our workforce skills. Particularly as a result of employee-sponsored immigration, migration assists us overcome not only geographic mismatches between employees and job opportunities but also the mismatches between the skills of the resident workforce and these opportunities. Again, immigration makes us more responsive to emerging opportunities.
I don't think I need to dwell on how immigration adds to our national talent pool. Whether in the arts, business, science, sport or indeed in any area you care to nominate, we find a healthy share of migrants, and the sons or daughters of migrants, among the leading ranks. This is not simply a matter of migrants coming and excelling in areas where Australia has traditional strengths; it is also a matter of migrants breaking new ground and creating new areas of Australian excellence. There is something of a filtering process at work here, with the act of migration adding disproportionately to the adventurous and the ambitious.
Similarly, there is little need to dwell on the way migration replenishes our diversity. We are not among the most multilingual countries in the globe because of anything we do to encourage teaching and learning of languages. This, as with other manifestations of our diversity, rests almost entirely on the strength of our migration program and the efforts of recent arrivals and their children to maintain fluency in their native languages. And diversity is not just a nice-to-have; it is a material factor in our ability to engage globally and to derive the benefits of this engagement.
The final area I want to touch on under the heading of dynamism relates to the capital stock. This may seem strange because the standard approach is to think that faster population growth would tend to dilute rather than add to the capital stock and we would require additional investment just to keep pace. But this reasoning owes more to the over-simplicity of economic models than to real world experience. In the real world, the quality of the available capital stock is itself constantly changing; there is a concerted global research and development effort directed precisely at this outcome. So, far from investing more rapidly just to keep up, when we invest we upgrade as a matter of course. With a strong immigration program we upgrade more rapidly and we accelerate improvements in the efficiency of our capital stock.
These benefits are typically left out of formal modelling of the impacts of immigration, and their absence contributes to a systematic under-statement of its material and cultural benefits.
Without any question, realising the full value of these benefits requires steps other than keeping the migration tap running. We need also to ensure that we add to our dynamism by attending to a range of other policy areas. In particular, we need to stop under-investing in infrastructure and in education and skills development.
This will help lift the pace of productivity growth (and if done properly will more than recover the costs of the additional investment), and will also address two of the major factors in contemporary Australian opposition to immigration: the sense that our cities are becoming over-crowded, congested and less liveable; and the argument that immigration allows us to get away with under-investment in our kids' education and in up-skilling the existing workforce.
Maintaining a healthy migration program and investing adequately and judiciously in infrastructure, education and skills development will go a long way to ensuring that we retain our reputation as a young, dynamic country that is open to new ideas and open to the world.
Photo by Flickr user Jules Le Moal.