Australia’s border strength morphs into weakness

5 minute read

Maggie Zhang and her boyfriend Sunny Gu, international students from China both studying for a Masters in Commerce at the University of Sydney, walk towards the security checkpoint at Kingsford Smith International Airport in Sydney, Australia, August 12, 2020.

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MELBOURNE, April 28 (Reuters Breakingviews) - On display in Melbourne’s Immigration Museum is a cartoon from the early 1900s depicting a customs officer harshly denying entry to Father Christmas because of his inability to pass a new language test designed to block non-Europeans from moving to Australia. The exhibit serves as a poignant and timely reminder of a painful history with migrants as the country grapples with the economic repercussions of its latest restrictions.

Prime Minister Scott Morrison’s government helped contain the pandemic by essentially shutting out foreigners since March 2019. Exceptions exist for family members of citizens, including this column’s writer and editor, and essential workers such as doctors.

Since the outbreak began, fewer than 30,000 total Covid-19 cases and just over 900 related deaths have been reported. A slow vaccine rollout in Australia means there’s little expectation that international borders will fully reopen before next year. A reluctance to jeopardise all the hard work and sacrifices made to keep nearly 26 million people healthy is understandable.

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It comes at a significant cost, however, for the A$2 trillion ($1.6 trillion) economy. About 30% of the population Down Under was born overseas, the highest proportion since 1893, according to Australian Bureau of Statistics data released last week. The last time the population shrank over the course of a year was more than a century ago during the depths of World War One.

The number of people in the country declined by 4,200 in the three months through September, as the net birth rate also slowed, and the 315,200 overseas migrant departures in the year to June was the highest estimate on record. The Treasury’s budget anticipates that there will be about 93,000 net emigrants for the 2020-21 and 2021-22 fiscal years, after welcoming some 400,000 net immigrants in the previous two.

Their arrival over the years helped power what was known as the Australian economic miracle, an unbroken stretch of nearly three decades of steady growth without a recession that ended with the coronavirus. Since 1980, GDP has grown by about 3.1% a year on average while the expansion averaged less than 2% on a per-capita basis, according to Deutsche Bank economist Phil Odonaghoe.

Corporate bosses are starting to fret. Coles, a A$21 billion grocery chain, flagged the issue as one of the biggest factors affecting its outlook. “If you look historically, the supermarket industry has grown by more than 3% per annum,” Chief Executive Steven Cain said after the release of the company’s half-year financial results. “But more than a third of that has come from immigration, and obviously that’s a compounding effect, and it may be permanent unless it’s reversed.”

The impact of a two-year stretch without new residents from abroad would extend far beyond just the retail sector. Australia’s suffering universities are bracing for the possibility that their large numbers of Chinese enrollees will dwindle for an extended period because of intense geopolitical strains. Foreign students generated A$10 billion of fees in 2019 and contributed even more to the economy in living expenses.

Property prices are on the rise again in Australia thanks to ultra-low interest rates; the average home in Melbourne, the city worst hit by the pandemic last year, now sells for more than A$1 million for the first time, the Real Estate Institute of Victoria revealed earlier this month. The danger remains, however, that without migrants there could be a glut of new dwellings that alters the financial equation.

Moreover, even with the possibility that productivity could improve across the country, there are also liable to be pockets of labour and skills shortages. Many jobs tend to be filled by temporary visa holders and visiting backpackers. And the government faces a potential decrease in tax revenue.

These Covid-related challenges follow the politically charged curtailment of immigration to Australia. In the runup to the 2019 election, when Morrison was trailing in the polls, he slashed the annual intake cap to 160,000 from 190,000. As Treasurer, he had previously rejected such a proposal when former Prime Minister Tony Abbott called for even more drastic cuts a year earlier. Some entrants also were barred from living in the country’s biggest cities for three years.

Australian attitudes toward foreigners have stiffened. A ReachTel survey in 2019 found that nearly two-thirds of Sydney residents supported curbs on migrants moving to the city. The same year, 62% of respondents to a Lowy Institute poll agreed that “accepting immigrants from many different countries makes Australia stronger.” That’s a broadly constructive perspective, but it’s also 10 percentage points lower than a few years earlier. Likewise, the share of those seeing a positive impact on the economy from immigration slipped.

Economic sluggishness could modify such opinions on congestion and racial insecurities. It may put Morrison under pressure to revise his policies, perhaps even to expand anew the number of entry visas to help both the demand and supply sides of the equation. Failure to acknowledge and embrace the significant contributions of newcomers to Australia’s prosperity risks inviting stagnation. That sort of result might someday leave the prime minister next to a forlorn Santa Claus being shoved off a pier, lampooned on the walls of the Immigration Museum for posterity.

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- There were over 7.6 million migrants living in Australia as of June 30, representing 29.8% of the population who were born overseas, according to data released on April 23 by the Australian Bureau of Statistics.

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