Australia Needs to Sustain Immigration to Sustain Economic Growth – Bloomberg

2018/03/17 Leave a comment

The main fallacy in Daniel Moss’s arguments lies in not making any distinction between growth in GDP and GDP per capita. It is the latter that is a better measure of individual prosperity.

Both the Barton Commission and the Century Initiative make the same mistake in their arguments for large increases in immigration to Canada:

Australia just wrapped up its 26th consecutive year of economic growth. It’s always happy to trumpet that, but one major cause doesn’t get enough respect.

I’m not talking about the ascent of China, the country’s biggest trading partner, which certainly played a part. Nor do I mean Australia’s mineral wealth or the fiscal stimulus unleashed in 2008-2009 to fight the global slump.

The quiet force behind this growth streak is immigration. Or as squeamish politicians sometimes call it, “demographics” and “population growth.” Policy makers should be full-throated about the role immigration has had in sustaining Australia’s near-record run. There is a good story to tell, and the world ought to be listening. Who doesn’t want economic expansion?

Some, it would seem. Australia has its own right-wing nativist rabble. The urban-rural divide familiar to Northern Hemisphere readers is changing the contours of discourse Down Under — though less starkly, in part because compulsory voting maintains the sway of dense population centers and mainstream parties. There’s a risk that immigration becomes more of a whipping boy and the two major political parties, seeking to stem an erosion of support, go cold on population renewal as well.

The irony is that just as Australia cools to its points-based immigration system, that approach is getting buzz outside the country. Potential migrants are ranked according to the nation’s need for their skills. They also must pass health and character tests. There’s an English-language test on the country’s constitution, history and values.

Philip Lowe, governor of the Reserve Bank of Australia, reminded an audience last year not to be drunk on international praise for the economic expansion. It hasn’t been 26 years of gangbusters growth for all: There were three periods of rising unemployment during that run, even if gross domestic product didn’t contract. He also worries that average growth in per-capita incomes over the next quarter century will be lower than in the previous quarter century.

Population growth, much of it through immigration, has swelled the national headcount by 50 percent over the past three decades, as noted by my Bloomberg News colleagues Jason Scott and Michael Heath. Lowe told the Crawford Australian Leadership Forum that “strong” population growth “flattered our headline growth figures.” GDP growth per capita certainly looks less awesome; it was almost zero at the end of last year. Other developed economies, take heed!

So what’s the problem? Let’s divide it into two buckets. The first is legitimate concern about strains on the environment. Australia is huge, but large tracts are barely populated. Most people live in a corner hugging the Eastern and Southern shores. So that sliver of the country is increasingly strained in terms of infrastructure. Housing prices are seen as out of reach for many, though that’s not a uniquely Australian phenomenon. You can make this argument and still be broadly supportive of a diverse and globally integrated national fabric.

The second bucket is thorny: a motley few radio shock jocks and single-issue politicians who gamble that trashing immigration will win them votes in outer suburbs or rural areas. Compulsory voting ensures that because everyone has to show up, the most extreme candidates tend to be offset or buried by the more traditional parties. They can still siphon votes, win the odd seat, rattle around and make trouble.

It’s the latter point that is the danger today, both fueled and compounded by the fact that Prime Minister Malcolm Turnbull’s conservative coalition has a mere one-seat majority in the parliament’s lower house. The opposition Labor Party smells blood, but its leadership is preoccupied with tactics rather than strategy.

Immigration is an easy, but risky, issue on which to make hay. Without immigration, Australia’s economic story would not have been such a happy one. For the sake of extending that 26-year run, politicians should resist the nativist temptation.

via Australia Needs to Sustain Immigration to Sustain Economic Growth – Bloomberg

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Morneau advisers urge sweeping changes to cope with looming tech disruption

2017/12/12 2 Comments

Following its earlier report urging an increase of immigration levels to 450,000 per year, the Barton Commission suddenly recognizes technological disruption and its impact on the labour force – [Canada] “can no longer rely on the old formula for economic growth, which emphasized investments in machinery and equipment, and population growth.”

Ironic, to say the least.

The earlier recommendation of increased immigration would have benefited from analysis of the possible impact of technological disruption. Perhaps a revised immigration recommendation is needed?:

Canada is ill-prepared for the effects of widespread technological disruption reshaping the global economy, Finance Minister Bill Morneau’s expert panel of economic advisers are warning in a set of reports scheduled for release this week.

To prevent the country’s economic growth from falling behind that of other nations, the group is recommending a modernization of Canada’s tax and regulatory systems to make them more innovation-friendly.

In addition, it is calling for a $15-billion spending surge to retrain workers so their skills are up to speed in a rapidly shifting labour market.

The recommendations are contained in advance drafts of the latest reports from the 14-member group, formally known as the Advisory Council on Economic Growth, obtained by The Globe and Mail.

“The latest wave of recommendations is geared towards preparing our economy … to capture the opportunities and handle the disruption coming over the next decade,” said council chair Dominic Barton, global managing director of consultancy McKinsey & Co. Mr. Barton was one of several council members who spoke with The Globe about their third set of recommendations to government since the council’s formation in March, 2016.

“The world is going through a period of unprecedented change, which offers many opportunities but also brings significant volatility,” the council writes in one of the documents, received by Mr. Morneau earlier this month. “Canada must be prepared to navigate this change and volatility. It can no longer rely on the old formula for economic growth, which emphasized investments in machinery and equipment, and population growth.”

The new reports come as Mr. Morneau crafts his third budget, for release in early 2018. They likely provide a sense of policy themes under consideration given the government’s close co-operation with the council and quick action on several of its past calls. Proposals that have been adopted include the launch of an infrastructure bank, the creation of a federal entity to promote foreign investment into Canada, and changes to boost immigration levels and hasten the process for high-skilled foreigners to move here. A spokesperson for Mr. Morneau said the minister has had good discussions with the council and will carefully review its suggestions as he prepares the budget.

…The new reports focus on preparing Canadians for an economy rapidly shifting away from the production and sale of physical goods to the commercialization of digital services and intellectual property. That is being accompanied by changes in how work is done, and by whom – or by what. According to a recent McKinsey study, 45 per cent of activities performed by humans could be automated using existing technology. “Already, robots can build your car, take your lunch order, review your legal case history, sell you insurance or examine your X-rays,” reads one council report. The council says at least 10 per cent of the Canadian work force – about two million people – face job losses by 2030 and will struggle to find new jobs “unless they acquire new formal qualifications.”

The council acknowledges that federal and provincial governments are aware of the challenges and do fund training programs. Ottawa promised significant changes in the previous budget to existing agreements to transfer job-training funds to provinces and territories plus an additional $2.7-billion in related spending over six years. Federal Employment Minister Patty Hajdu said in an interview that negotiations to revise the transfers are going well and results could be announced in early 2018. The government previously responded to an earlier growth-council recommendation by setting up a new organization to study and report on Canada’s skills needs.

But council member Ilse Treurnicht, former CEO of Toronto’s MaRS Discovery District said, “much more needs to be done given the wave that’s headed our way. It will take an all-hands effort.” She added that other countries are experimenting with retraining efforts, but “it is still early in the process.”

The growth council calls for a “jolt to the system” with the creation of a “third pillar” alongside the education system and regimes for funding retirement and unemployment insurance. “The focus has to be about providing skills upgrading capabilities and opportunities for people who are in the labor market,” said council member Michael Sabia, CEO of the Caisse de dépôt et placement du Québec.

At the heart of the council’s proposed $15 billion-per-year skills funding boost would be a new $2.5-billion-per-year government fund for training employed adults. The $15-billion amount would be jointly funded by government, industry and individuals. Mr. Sabia said it was “premature” to say how costs would be split. The council also calls for the government’s employment centres to be transformed to provide not only help for the unemployed but also career and training guidance for working adults and employers. “What we’re really saying is … the country has to get on with the discussion that’s required about how are we are going to deal with this issue,” he said.

via Morneau advisers urge sweeping changes to cope with looming tech disruption – The Globe and Mail

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