Politics Opinion

Federal Government's 'Intergenerational Report' based on a fallacy

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Treasurer Josh Frydenberg's 'Intergenerational Report' endorses immigration on a large scale (image via YouTube)

On 28 June, the fifth 'Intergenerational Report' (IGR) was finally released.

After a long delay, Federal Treasurer Josh Frydenberg and the Treasury lay it all out.

The problem is the IGR is based on one big lie.

Treasurer Josh Frydenberg outlines how 30 years ago, for each person aged over 65, there were 6.6 people of "working age". Today, there are four working age people and by 2060-61, there will only be 2.7 for each person aged over 65. In other words, the economy can’t afford an ageing population.

You’d think workforce participation had gone down in the last 30 years, with worse to come. It hasn’t. The opposite has happened.

But isn’t living longer a good thing? And what is "working age" anyway?

According to the IGR’s central economic assumption, you are apparently working (and paying taxes) if you are 15-64 years of age. Conversely, you are not working (or paying taxes) if you are 65 and above.

The IGR authors at the Federal Treasury have clearly not left the 20th Century.

What matters is what portion of the population is actually working, not what portion is 65 and above.

This tricky and obsolete working age assumption in the IGR, upon which the whole report hangs, will be endlessly spun by politicians, activists and the media in coming days, weeks and months. Yet as any economics 101 student, often 19 years old and studying full-time for the next few years, should know, there is an inconvenient truth here: age does not determine workforce participation.

Workforce participation is more so determined both by economic opportunity and reducing discrimination in the workforce. Over recent decades, opportunity for, and discrimination against, women have both significantly improved, allowing much greater workforce participation for women of all ages.

Workforce ageism is another area we can greatly improve on, along with employers taking up their responsibility to increase training and education for Australian youth.

COVID-19 and the shutting of Australia’s borders has inadvertently helped in this regard, with less access to cheap and exploitable migrant labour. We’ve seen much-improved outcomes, with the Australian Bureau of Statistics (ABS) revealing that youth unemployment just hit a 12-year low.

I’ve written before that:

'In Australia, an increasing number of people (voluntarily) work past 65, offsetting an increase in the average age and stabilising our workforce participation ratio.'

But "stabilising workforce participation" now looks like a pessimistic estimate. The COVID-19 pandemic has actually helped to drive Australia’s overall workforce participation rate to an all-time high of 66%. It was around 61% in 1980 and has been steadily growing since, despite a gradually ageing population that the IGR claims brings workforce participation down.

This again proves the point that ageing does not determine or lower overall workforce participation. Societies adjust. Australia’s healthy and many welcome th gradual ageing process, which has been accompanied by higher workforce participation. 

There is still a lot of slack in the market with many people across all ages unemployed and underemployed. Recent estimates put this number at over 2.5 million Australians (19% of the workforce).

What’s the real agenda and why is the Federal Treasury’s IGR ignoring this empirical evidence?

Mr Frydenberg will say the fiscal and economic challenges associated with a smaller and older population must be met with a 'well-targeted, skills-focused migration program'.

This is despite it being scientifically proven that migrant Australians age at exactly the same rate as everyone else and that immigration has no material or long-term impact on ageing.

The IGR also gnashes its teeth over lower fertility, but totally ignores one of the key reasons – skyrocketing housing prices driving up Australia’s cost of living – and then doubles down on one of the key drivers of this housing affordability crisis, being government-engineered rapid population growth.

Talk about a self-defeating policy agenda.

The IGR was cooked up as an idea to napalm society into accepting something it is sceptical about and has never been properly consulted on: high immigration-fed population growth.

Rapid population growth – as opposed to slow and managed population growth – has many economic and environmental costs and relatively few benefits, even under the pessimistic workforce participation assumptions in the IGR.

For example, even under the IGR assumptions

'... per capita real GDP growth will slow only slightly, the IGR will say, from 1.6 per cent over the past 40 years, to 1.5 per cent.'

Did anyone notice the recent Reserve Bank statement that the pause in Australia’s migration program will lead to higher per capita living standards for Australians? 

There are other fallacies in the IGR, but the central assumption of lower workforce participation is the key issue to focus on. Everything else in the report falls down like a house of cards once this big lie is exposed.

The IGR is a key weapon used by major party politicians to uphold a system of governance and economics that is corrupt to the core, designed to benefit the few at the expense of the many.

All of this demonstrates that the IGR is yet another case of lies and statistics.

It is clear that the IGR engineers its conclusions to support a pre-conceived narrative. It also ignores that personal income taxes are only part of the tax economy and that the Reserve Bank of Australia has an unlimited amount of money to print to pay for any so-called budget deficit, including COVID support and the aged pension system. 

A long-lived society with low population growth is clearly the best outcome for the economy, environment and society.

Australia should hold a stand-alone national "population plebiscite". It would give all Australians the choice between the current government target of around 40 million by 2050 and a much more manageable 30 million.

The latter can be achieved with one simple policy change: lower annual permanent immigration program from the recent level of around 200,000 back to the average annual permanent intake level during the 20th Century of around 70,000.

Lower immigration is not “anti-immigration” as some will assert. Lower immigration is the most pro-immigration thing we can do. It will help to rebuild broad public confidence in the immigration system for the long term. Critically, a manageable rate of immigration will also help to prevent voters from being driven into the arms of political parties with extreme immigration policies.

William Bourke is President of Sustainable Australia Party.

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