Glaring omission from productivity summit

News.com.au

2 days ago

A key word is missing from the agenda for the government's productivity summit this week: immigration.
Experts say a massive influx of migrants into Australia in recent years has had a clear impact on productivity.
But there has been no mention of it at the Economic Reform Roundtable in Canberra, where leaders from government, business and unions are discussing how to turn around the country's productivity slump. Nor was it highlighted in RBA and Productivity Commission reports leading up to the event.
University of Sydney Associate Professor Salvatore Babones said despite its key role, immigration was the 'one forbidden word' at the summit.
'There is at the very elite level a consensus not to rock the boat on immigration,' the sociologist told news.com.au.
'It's simply not a political issue in Australia - it's kept off the agenda. Whenever it does come up it's the minor party crazies who raise it.'
Meanwhile in Canada, immigration had been directly linked to housing and productivity issues, leading then-prime minister Justin Trudeau to announce a pause on temporary migration in 2024.
Australia is dealing with a similar decline in productivity growth, which will lead to lower wage growth and living standards if it isn't addressed. So how does immigration play a role?
The problem, Mr Babones said, was most immigrants to Australia were low-skilled and temporary workers, on student and working holiday visas, who went into low-productivity sectors like hospitality and care.
'Low productivity doesn't mean lazy, it doesn't mean useless,' he said.
'It's not anything against the worker or the lifestyle. But if you have a large number of people working low-productivity jobs like Uber Eats, then you'll reduce the overall productivity of the economy.'
Foreign youngsters from countries like China and India now make up more than 10 per cent of Australia's total labor force.
He said the influx was obvious across Australia, marked by a profusion of massage parlours, Uber drivers and other low-wage jobs.
The country was 'sleepwalking' its way into becoming a guest-worker economy like that of Singapore, where poor people from developing countries do all the tough work, he warned.
Mr Babones said productivity growth surged during the pandemic, when immigration collapsed, and then came to a screeching halt when the borders opened in 2022.
Australia added 1.3 million net immigrants in 2022-2024, and over that period, productivity fell by an unprecedented 4.6 per cent.
Immigration data released by the ABS on Thursday showed net permanent and long-term arrivals (NPLT) for the year to June 30 reached 279,460 — the highest on record, exceeding the previous record in 2024.
In the full financial year there were 457,560 arrivals, the second highest on record.
The Institute of Public Affairs (IPA) said the federal budget's FY25 forecast for net overseas migration (NOM) of 335,000 had been exceeded by 37 per cent, or 122,560 people.
NPLT and NOM are different but closely related measures.
Mr Babones pointed out that since Canada announced its pause on temporary migration in late 2024 - a policy confirmed by new prime minister Mark Carney - its labour productivity had started growing again.
MacroBusiness Chief Economist Leith van Onselen described the omission of the immigration issue from this week's summit as 'wilful ignorance'.
'They're just refusing to discuss the elephant in the room,' Mr van Onselen said.
'It makes no sense - it's one of the fundamental economic drivers of Australia.'
Australia had grown its population rapidly via mass immigration - by 8.7 million people this century, he said.
But it had failed to provide the workers with extra tools, machinery and technology.
Business investment had not kept pace with the influx of people, resulting in an economic phenomenon called capital shallowing, or less capital per worker.
Capital shallowing leads to lower productivity because it reduces the efficiency with which workers can produce goods and services.
The solution, Mr van Onselen said, was to reduce the volume of migrants to Australia and emphasise high-skill labor.
'We're basically just importing workers to go and work in low-productivity service firms - Uber drivers, food delivery drivers - so we're running a really low-productivity system here.'