Here's why Australia needs to trim its immigration levels

There are some good reasons for Australia to slow the rate of population growth. With the government having little or no influence of birth and death rates, a slowing in the pace of immigration is the only way this can be achieved.

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There are a number of vital areas of societal well-being which are being undermined by too much of a good thing, in other words, excessive population growth.

Importantly house prices, congestion in the cities and stretched infrastructure which is slow and expensive to add to, are all being impacted negatively by too many people for the existing facilities.

There is excess demand for a given level of supply, in other words. It is simple economics at play.

Like a doctor looking at symptoms of a problem before looking for the cause and then the cure, there is a clear dissatisfaction with housing affordability, clogged roads, inefficient public transport as well as there being a strong reluctance to pay more tax so that schools, hospitals, power and water services can be expanded.

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The cure is to trim the immigration levels until these other areas catch up and society and the economy can be more efficient.

When one considers that at current rates of increase, Australia’s population is rising by around 1 million people every three years and the overwhelming majority of those extra Australians are immigrants who live in the cities, it is easy see how the problem is emerging.

At this point, it is important to note that excessive population growth is a specific problem to Australia.

In the past decade, Australia’s population has increase by an average annual rate of 1.7 per cent. This compares with 1.2 per cent in New Zealand and 1.1 per cent in Canada, both of which is experiencing similar problems to Australia on housing and infrastructure even with a significantly slower rate of increase.

By way of further comparison, over that decade population growth averaged just 0.8 per cent in both the US and UK and a remarkably low 0.3 per cent in the European Union countries.

It is no coincidence, perhaps, that in many European countries, infrastructure is sound, public transport is efficient and housing markets are stable and prices are affordable. There is not the excessive demand for these goods and services from a frantic rate of population increase.

The solution to most economic problems is usually straightforward. Several years of a lower immigration intake would allow the current dwelling construction surge to catch up to the shortfall in new dwellings and would see the current infrastructure spending surge in several of the main cities to continue.

A cut in the immigration intake is a difficult and contestable political decision. It would likely reduce bottom line GDP growth even though its impact on per capita GDP (almost by definition) would be minimal.

This might be a small statistical cost from a lower level of immigration.

Lower immigration does mean no immigration. All components of the immigration intake would be maintained, just that some would be at a lower level.

While a strong rate of immigration gives a clear and unambiguous benefit to the bottom line performance of the Australian economy over the medium to long run, the short term costs are evident in the issues mentioned above – housing, transport and other infrastructure.

A period where the immigration intake is trimmed might help to alleviate some of the problems that are being experienced in the big cities. Once those issues are addressed, there might be a case to lift the immigration intake for the long run good of the Australian economy.