Working Papers

Australia has become a net exporter of human and financial capital

I have an op-ed in the AFR noting that Australia has become a net exporter of human and financial capital. I argue that reversing these net outflows should be a priority for post-pandemic recovery. Full text below the fold. Note AFR is responsible for ‘savings’ instead of ‘saving’!

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posted on 22 December 2021 by skirchner in Financial Markets, Free Trade & Protectionism, Population & Migration

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Australia must avoid America’s demographic stagnation

I have an op-ed in The Mandarin on why Australia must avoid America’s demographic stagnation. Text below the fold.

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posted on 23 November 2020 by skirchner in Population & Migration

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Avoiding US-style demographic stagnation: The role of immigration and population growth in Australia’s post-pandemic recovery

I have a new report out with USSC Avoiding US-style demographic stagnation: The role of immigration and population growth in Australia’s post-pandemic recovery.

In the report, I compare recent demographic trends in Australia and the US, in particular, the decline in the US population growth rate to the lowest in a century, even before the onset of the pandemic. This is the product of record low fertility and the Trump Administration’s tightening of US immigration policy, which the Biden Administration will not be able to unwind quickly.

In Australia, population growth is set to slow to its lowest rate since 1916-17, mainly as a result of pandemic-related international border closures. Treasury is assuming no attempt is made in future to make-up the loss in net overseas migration, implying a permanent loss of populaiton and productive potential relative to a no-pandemic counterfactual.

In the report, I call for a federal government-funded increase in managed isolation and quarantine capacity to ease the rationining of international arrivals in the short-term. The government should also set aside its budget planning cap on permanent migration numbers with a view to making-up for lost NOM and reducing the permanent hit to Australia’s population.

I also argue that the government’s National Population and Planning Framework risks state government capture of federal immigration policy.

There is write-up of the report by Shane Wright in the SMH/Age.

posted on 16 November 2020 by skirchner in Population & Migration

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Welcome to Australia. That’ll be $25,000

Brian Toohey in the Weekend AFR suggests charging for permanent migration rights:

The time may be ripe to adopt a market-based solution to the political obstacles to obtaining more workers from overseas.

Charging immigrants a fee to help fund new infrastructure could help ease worries about overcrowding as more people become permanent residents. For refugees, paying the Australian government to come here would be a lot more attractive than paying a people smuggler. Combined with an increased refugee intake, it should help undermine the smugglers’ “business model”.

In theory, politicians who accept the free movement of capital, and goods and services, across international borders, should also accept the free movement of labour. In practice, both sides of Australian politics squabble over who can best control the inflow of new workers and their families, especially those who have fled political violence…

The migration program for 2012-13 of 190,000, including a humanitarian component of 13,750 refugees, is likely to stay around that level for several years. It is doubtful if a deferred fee of $20,000 to $25,000 per adult, with a discount for upfront payments and couples, would deter suitable applicants. If 190,000 permanent new settlers paid an average of only $17,500 each year, this would raise more than $3.3 billion annually when the scheme matured.

In my CIS Policy Monograph, Hands, Mouths, and Minds I suggested an auction scheme rather than a flat fee for permanent migration rights, including the humanitarian quota. However, an auction scheme should not be viewed primarily as a revenue-raising measure, but rather as a selection device. Prospective migrants have much more knowledge about their potential for success in Australia than bureaucrats in Canberra attempting to centrally plan the labour market. An auction scheme allows potential migrants to act on their superior knowledge while enabling the Australian government to economise on migrant selection processes by focusing only on security assessments.

posted on 01 July 2012 by skirchner in Economics, Population & Migration

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Taxing US Human Capital Flight

From this week’s Ideas@TheCentre:

US embassies around the world are accustomed to queues of people seeking to migrate to America. More recently, a new type of queue has been developing: American ex-pats lining up for the 10-minute and $450 ceremony in which they renounce their US citizenship. According to the Federal Register, the number of Americans renouncing their US citizenship or residency increased from 231 in 2008 to 1,781 in 2011. The US embassy in Bern, Switzerland, was recently reorganised to clear a growing backlog of citizenship renouncers.

This human capital flight gained prominence with the decision of Brazilian-born Facebook co-founder Eduardo Saverin to renounce his US citizenship and take up residency in Singapore. This led to accusations of tax avoidance, ingratitude and disloyalty levelled at the former immigrant to the US.

The accusation of tax avoidance is wrong. Under US tax law, expatriation is a deemed disposal for capital gains tax purposes. Saverin will pay taxes on his accrued Facebook capital gains while he was a US citizen. Only subsequent gains, if any, will benefit from the absence of capital gains taxes in Singapore.

The Saverin case nonetheless prompted senators Charles Schumer and Bob Casey to propose a new law, the Ex-Patriot Act, which would ban expatriates from ever re-entering America and tax an ex-citizen’s capital gains at a punitive 30% for 10 years. The Ex-Patriot Act has obvious similarities with the laws imposed by some of history’s worst regimes.

The US government has long made life difficult for its expats, taxing them on their global income, but the growing human capital flight from America has little to do with tax minimisation. The compliance burden resulting from the Foreign Account Tax Compliance Act and other new laws have made it increasingly costly to be an American abroad. Foreign firms are becoming reluctant to hire Americans, and foreign financial institutions increasingly refuse to deal with them because of the US government’s growing administrative overreach.

Rather than persecuting human capital flight, US senators would do well to consider why American citizenship is increasingly seen as a burden and not an asset.

posted on 02 June 2012 by skirchner in Economics, Population & Migration

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Auctioning Permanent Migration Rights: Friedman Agreed

My recent proposal to auction the right to permanently migrate to Australia was not new. I was treading a path already worn by Gary Becker and Julian Simon in the US, and Mark Harrison, John Logan and Wolfgang Kasper in Australia.

My proposal provoked predictable outrage from those unwilling to think about the idea for more than five seconds. The outrage is partly due to the failure to understand that an auction scheme is designed to facilitate migration, not prevent it. Wolfgang Kasper emailed me this recollection of his experience trying to sell the idea at a conference of economists in San Francisco:

It was a gathering of like-minded friends and some very prominent economists. We had been told that Milton and Rose [Freidman], who lived in their apartment nearby, would come to a morning session, when Milton (now 89) was fresh….Before long, Milton was in the midst of the debate, debunking some idea or elaborating and extending someone else’s. He was in fine form! At morning tea, we expected to say goodbye, but they said they had come for the day! “Rose and I are not a monument,” he said. “This is exciting work, it’s an elixir for Milton to mix with you people,” said Rose…

At one stage of the conference, when I spoke about the idea of selecting immigrants by worldwide auction, I was attacked by R. Rubin, a former Clinton Minister of Labor. He disagreed with me violently… “You just want to sell passports!” I had of course worked on this question in a consultancy report for New Zealand and stood my ground. Our argument became, in my opinion, a distraction to the main topic of our session. Friedman intervened: “I am sure that everyone here has understood Dr. Kasper’s rationale, and I agree with him. Robert, why don’t you think it over overnight. Give me a ring in the morning if you still disagree and I’ll buy you and Wolfgang the best breakfast in town, so we can argue it out some more!” This was vintage Friedman. Alas, Rubin never came back with his counterarguments, and I never was bought breakfast by Friedman.

posted on 27 October 2011 by skirchner in Economics, Population & Migration

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Hands, Mouths and Minds: Three Perspectives on Population Growth and Living Standards

CIS have released my Policy Monograph Hands, Mouths and Minds: Three Perspectives on Population Growth and Living Standards. It gets a write-up in The Australian today.

posted on 19 September 2011 by skirchner in Economics, Population & Migration

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How to Respond to the Terms of Trade Boom

From this week’s Ideas@theCentre:

Listening to some commentators, you could be forgiven for thinking that the terms of trade boom was the worst thing that ever happened to the Australian economy.

Relative to what we pay for our imports, Australia now gets higher prices for its exports than at any time since at least 1870. This was illustrated by Reserve Bank Governor Glenn Stevens’ observation that ‘five years ago, a ship load of iron ore was worth about the same as about 2,200 flat screen television sets. Today it is worth about 22,000 flat-screen TV sets.’

This increased international purchasing power is attributable not only to rising commodity prices, but also lower prices for imports, not least manufactured goods. The flip side of Australia’s terms of trade boom is the collapse in the terms of trade for countries like Japan.

It wasn’t supposed to be this way. In the 1950s, economists Raúl Prebisch and Hans Singer argued that manufactured goods prices would enjoy a secular rise relative to commodity prices and that developing countries should engage in activist industrial policy and import substitution to avoid a declining terms of trade. The same argument has long been made in Australia, but would have had disastrous consequences if its policy prescriptions had been followed in response to previous terms of trade slumps.

Julian Simon would certainly agree with the proposition that real commodity prices should decline in secular terms, but he also noted the broader gains in real purchasing power from increased productivity and declining real prices for manufactured goods. It is fair to say that Simon would have been agnostic on any trend in their relative prices.

The terms of trade boom came about in part because it was unexpected, not least by the mining industry itself. It underinvested in the 1990s, partly because of implicit acceptance of the Prebisch-Singer hypothesis on the part of many investors. Historical experience highlights the danger of conditioning public policy on assumptions about the future direction of relative prices for traded goods.

Our best response to the terms of trade boom is to become even more open to inflows of foreign labour and capital and to reduce the government’s command over resources so that the mining industry can expand with less pressure on other sectors. While the non-mining sectors will contract relative to mining, they can still expand in absolute terms if we continue to remove government-imposed resource constraints to overall economic growth.

posted on 02 September 2011 by skirchner in Economics, Foreign Investment, Free Trade & Protectionism, Population & Migration

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Are People Hard-Wired for Density?

Hunter-gatherers validate Julian Simon:

Every additional person requires less land than the previous one. That’s an important statement. Not only does it say we’re hardwired for density, it also says a group becomes 15 percent more efficient at extracting resources from the land every time their population doubles. Each successive doubling in turn frees up 15 percent more resources to be directed towards something other than hunting and gathering. In other words, complex societies didn’t just evolve as a way to cope with high-density—they evolved in part because of high density.

posted on 25 August 2011 by skirchner in Economics, Population & Migration

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How to Talk to Modern Malthusians

‘You go first’.

posted on 14 January 2011 by skirchner in Economics, Population & Migration

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A ‘Small Australia’ Will Limit Our Creativity

I have an op-ed in today’s SMH arguing that a ‘small Australia’ will not only limit economic progress, but also scientific and cultural creativity:

Like the US, Australia provides an environment in which people and their ideas can flourish. But while the tyranny of distance has receded with advances in communications technology, Australia’s small scale remains an obstacle to economic and other forms of progress. How often do Australian innovators complain about a lack of local commercialisation opportunities and local markets? How often do customers complain of an apparent lack of competition in industries dominated by a small number of companies?

Entrepreneurs, scientists, writers, artists, actors and filmmakers often find Australia too small for their talents. They move to other countries, even if it is with reluctance. While their talents are not lost to the world, Australia is the poorer for them leaving.

Similarly, New Zealanders move to Australia because it provides opportunities that are either non-existent or in insufficient supply in a country with a population no greater than Sydney. Australia’s relatively large and crowded cities are beacons to New Zealanders. While New Zealand enjoys the same institutions and a similar culture to Australia, few Australians would choose to make a new life there. The reluctance is hard to explain with reference to anything other than the limiting effects of scale on life and opportunities in New Zealand.

posted on 07 September 2010 by skirchner in Economics, Population & Migration

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Sydney: Too Many People in 1912?

I have an op-ed in today’s Australian referencing an article in the Sydney Morning Herald from 1912 about how Sydney’s then transport system supposedly could not cope with a population of 700,000.

The text below the fold is a slightly longer version that went out on Friday in the Ideas@TheCentre series. You can subscribe to Ideas@TheCentre here.

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posted on 19 August 2010 by skirchner in Economics, Population & Migration

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The Making of Dick Smith’s Population Puzzle

In February this year, I was contacted by Dick Smith’s researcher Sarah Gilbert to provide some background for his anti-population growth documentary, Dick Smith’s Population Puzzle. She mentioned a column by Paul Sheehan, which had quoted me making the point that faster population growth required faster economic growth to maintain living standards. No doubt they saw this as a bad thing, but must have finally twigged that I thought it wasn’t, because I heard no more from them, even though Dick and the production crew were on campus a few weeks later and could have easily dropped in to see me. They did interview my UTS colleague Jock Collins, but they obviously didn’t like what he had to say either, because it was not included in the final cut.

Dick later wrote to me taking exception to an op-ed I had written for The Australian, in which I called some of his arguments absurd. I took the opportunity to try and steer Dick in the right direction by referring him to some books by Julian Simon, but he gave no indication he ever bothered to read them.

The documentary screened on the ABC last night. Dick gave significant air time to only one pro-growth advocate, Bernard Salt, but could not help impugning his expertise and motivation. There may be plenty of things wrong with Bernard Salt, but being a historian and working with KPMG are not among them. If Salt is as unqualified as Dick would have us believe, why include him in the documentary? Because Dick has a completely closed-mind on the issue and is uninterested in giving the other side of the argument a fair go.

posted on 13 August 2010 by skirchner in Economics, Population & Migration

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Just Enough of Me, Way too Much of You

With both major parties offering to retard economic growth by conditioning immigration on existing policy failures in housing, transport and infrastructure, Imre Salusinszky offers politicians some handy talking points:

From one perspective, it’s a neat trick: you pander to inner-city prejudice by abandoning road construction, then use what you perceive to be outer-suburban bigotry to paper it over.

But in order to prevent further embarrassment, as politicians attempt to source our problems to the fact there are almost three citizens shoehorned into every square kilometre of Australia, here are some talking-points:

* Frustrated you can’t get tickets to the big game? Once we block the reffos, convince people to stop having sex, and move across to a sustainable Australia, everybody will be able to attend the AFL or NRL grand final.

* Sick of waiting around in the morning while other family members use the bathroom? Me too, and I blame the fact there are too many people in Australia.

* Can’t get the job you want? Can’t win the girl you desire? Can’t own the car of your dreams? Have you noticed the common link? That’s right: there’s always some other bastard who already has these things. Too many Australians!

As best as I can tell, the only political party with a pro-immigration policy platform is the libertarian Liberal Democratic Party (you can read their policy here).

posted on 28 July 2010 by skirchner in Economics, Population & Migration

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We Will Never Build it Before They Come

John Birmingham gets the relationship between population growth and infrastructure:

Our built environment, our urban infrastructure has always lagged at least a decade behind what was required to house and support our population. We don’t build empty cities and wait for them to fill up. It’s more efficient, and less wasteful, to cram our new arrivals into the streets and houses and apartment blocks and schools and offices and factories we already have. Only then do we begin to build the extra capacity we need to service the growth.


posted on 22 July 2010 by skirchner in Economics, Population & Migration

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