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Australia can afford more refugees and asylum seekers – economist

17 November 20150 comments

The economic cost of a larger intake by Australia of humanitarian migrants would be “small and manageable”, according to leading economist and former Reserve Bank official Gordon Menzies.

Menzies, an associate professor of economics at the University of Technology who is currently lecturing at Oxford University, has written a paper titled ‘Stop the Boats: Do the ends justify the means?’ examining the economic cost of such a policy change.

Leading economist asserts that Australia can afford more refugees and asylum seekers

Leading economist asserts that Australia can afford more refugees and asylum seekers

He starts by observing that Australia’s intake of so called “boat people” has been low compared to our total migration intake.

In the first 12 years of the 21st century, Australia’s annual intake of migrants averaged about 150,000. The humanitarian component was just a tenth of this, about 15,000. The average intake of “boat people” was about 4000 a year.

Looking at the cumulative intake since the year 2000, within three years we could have created another city the size of Hobart (200,000 people). Within 10 years, we could have created another Adelaide (1.2 million people). During the entire 12-year period, Australia added enough migrants to populate another Brisbane (2 million people).

By contrast, Menzies says, the number of boat arrivals during this time pale in comparison at just 58,000.

Menzies has modelled what would have happened if, over the first 12 years of this century, we took 10,000 more boat people each year and 10,000 fewer skilled migrants?

“Today we’d have 120,000 more boat people and 120,000 fewer skilled migrants,” he says.

“There would undoubtedly be a cost to economic production but the cost would be small and manageable,” Menzies says.

He found that economic output would be $190 lower per person per year if we changed the composition of migration in this way.

That is, GDP would be 0.29 per cent smaller per year. Compound this for a generation, over 40 years, it would mean a one-off cost to GDP of 5 per cent – about on par with a commodity price shock.

“Even if the modelling were mistaken by a factor of two, the impact on the economy is arguably quite manageable. Whatever obstacles stand in the way of a more liberal immigration policy, a crippling economic cost is not one of them,” Menzies says

But the modelling probably overstates the cost by taking a pessimistic view of the employability of asylum seekers relative to skilled migrants by assuming they are half as employable.

It also excludes the fact that while many boat people arrive too young to work, they will eventually grow to working age.

And it doesn’t take into account that refugees traditionally display high levels of entrepreneurship.

Menzies finds puzzling arguments that many asylum seekers are really economic refugees.

“It seems a little odd to be critical of people pursuing financial advantage when our whole economic system and our migration program are based on that motive,” he says.

Menzies says a more liberal migration policy would avoid several hidden costs, not least the trauma to detention staff, forced to administer the ‘stop the boats’ policy.

He says it would also avoid damage to Australia’s “social capital”, important for volunteering, charitable giving and tax compliance and the international brand damage Australia has incurred over its asylum seeker policies.

Laurie Nowell
AMES Australia Senior Journalist