Tony Abbott’s attempt to exploit xenophobic fears about high immigration would cost Australia over $200 billion in lost GDP over the next four decades, and significantly reduce GDP per capita, Treasury data shows.

Yesterday Abbott announced he would slash immigration to levels far below those of both the Howard Government and the Rudd Government, although he declined to specify a target, instead releasing a “discussion paper” and promising to replace the Productivity Commission with a “Productivity and Sustainability Commission” to develop a target range for immigration.

However, both the discussion paper, and Abbott in his remarks at his press conference yesterday, suggested that he would aim to “build consensus” around a 2050 target of 29 million people, using an annual net migration figure of 140,000 a year.

This year’s Intergenerational Report forecast net migration of around 180,000 a year.  In the last 18 months, driven by high levels of student visas and Australians returning home to escape the GFC overseas, net migration has increased to over 280,000.

Treasury modelled a range of scenarios in its Intergenerational Report.  It expects the Australian economy to grow on average at an annual rate of around 2.7% to 2050, based on a population growth rate of 1.2%.  If other factors were held steady and population growth was reduced to 0.8% – corresponding to a net migration level of 100,000 a year – that would reduce real GDP by 17% by 2050.

On this basis, Tony Abbott’s “consensus” target of 140,000 would slash GDP by around 8.5% – or around $290b, based on projections of current GDP figures.

Treasury specifically modelled “high” and “low” growth scenarios, of 210,000 net migration or 150,000 net migration.  The 150,000 net migration figure cuts GDP growth by 0.14 percentage points every year, and GDP per capita by 0.02 percentage points every year, slashing GDP by over $170 billion by 2050, and cutting GDP per person by over $7,000 a year.

Abbott’s “consensus target”, at 140,000, is significantly lower than this figure and would inflict even greater damage on the economy.

The Coalition discussion paper tries to avoid the issue of impact on GDP by focusing exclusively on GDP per capita (which of course is less affected by immigration cuts), claiming “correlation between movements in net overseas migration and growth in GDP per capita is weak”, based on its own statistical analysis.

Abbott’s target is lower than the entire migration program in 2008-09 (171,000) and indeed in the last two years of the Howard Government.

To meet the Abbott “consensus target” while retaining skilled migration, the entire temporary visa program and student visa programs would have to be shut down, as well as the humanitarian program, which will accept 15,000 asylum seekers this year.  The closure of the student visa program would destroy Australia’s multi-billion dollar international education industry and prevent employers from hiring skilled workers from overseas when none are available locally, driving up wage inflation in sectors with skill shortages.

The Coalition discussion paper also claims that “when the Coalition left office, almost 70% of our permanent migration intake (excluding refugee and humanitarian visas) was skilled migration,” and that the Rudd Government has let that proportion fall to “two-thirds”.  According to the Department of Immigration’s annual reports, in 2006-07, the last full year of the Howard Government, skilled migration was 66% of the permanent migration program.  In 2008-09, it was 67%.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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