Is Immigration The Key To Growth?
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Is Immigration The Key To Growth?

An influx of people could calm future volatility.

By Paul Miron
Thu, Nov 11, 2021 1:42pmGrey Clock 5 min


Australia has been blessed over its economic history, weaving and dodging through major financial crises relatively unscathed. It entered the COVID-19 pandemic, which has caused the most severe global economic shock since the Great Depression, from a position of extreme strength — the budget was in balance for the first time in 11 years, workforce participation at a record high and welfare dependency at its lowest in a generation.

Australia was bathing in the glory of the most prolonged uninterrupted GDP growth worldwide in 30 years.  Australians also have emerged post-COVID as the wealthiest people per capita globally. Australia’s economy is the most robust according to OECD as per below.

Has our luck run out?

Learning From The Past

In every significant economic challenge presented to Australia over the past 30 years, there has been unexpected good fortune that allowed Australia to adapt and find new opportunities.

That was not always the case, as in the 90’s recession we experienced a period of stagflation, reflected by high inflation of 5.5%, negative GDP growth, official interest rates of 12%, and unemployment of 12%, with the manufacturing industry being decimated.

At that time, Australia ranked extremely low within the OECD nations regarding income per capita. At the time, Singaporean Prime Minister Lee Kuan Yew berated Australia, warning Australians were on track to become “the poor white trash of Asia.”

Despite the dire circumstances, Australia has used this era to introduce successful economic reforms that have served well for many decades.

Our economy adapted and prospered to new opportunities such as mining, tourism, and education. Fast forward to 2007-2008, whilst the world was haemorrhaging during the GFC, our stringent banking regulatory framework led to our four leading banks being amongst the top ten in the world at the time, cushioning the crisis and emerging even more robust post-GFC.

Present-day Challenges

The emerging economic impacts of COVID have some similar traits to those of the ’90s.

Once the inflation genie escaped from the bottle, we now see the latest inflation figure of 2.1% year on end at their highest. Importantly, this has been the case over the past six years and indeed inflationary economic indicators are not abating. Vigorous debate is brewing among economists and academics whether inflation is truly transitionary due to lockdowns.  Other words such as stagflation, hyperinflation, sporadic, core inflation, deflation, and asset inflation have been added recently to our vernacular.

The genuine concern is that despite the RBA governor’s assertions that interest rates will remain unchanged until 2023, it is unlikely that he will want to play chicken with the threat of inflation and so be unwilling to increase interest rates. By raising interest rates, nearly all assets will reverse their stellar fortunes, and deflate accordingly. The increased risk of an uncertain economic recovery and recessionary risks will continue to plague consumer confidence as a result.

The 2021 Intergenerational Report

It is a report commissioned by the government to explore the economic drivers for the next 40 years.

The report outlines the three pillars of Australian economic growth for the next 40 years.

Population: Increase by net migration, considers impacts of net deaths and births.

Participation:  The workforce is defined by demographics and willingness to work, unemployment rate, or summed up as the total work hours of the output of the entire workforce.

Productivity: Is the average output per unit of input. Productivity can be enhanced using technology and capital investment in creating efficiencies in the workplace.

The single item that governments can immediately impact is the level of migration that drives population growth. As markets are efficient and competitive, immediate advantages and adaptation of new technologies are therefore temporary.  However, in conjunction with the balanced migration policy, these can further improve both participation and productivity, delivering positive economic outcomes.

The International Monetary Fund (IMF) has found that 1% growth to the subsequent migration adds approximately 2% to the national GDP. It also impacts productivity per worker as it complements the existing population and negates an aging population.

Migration traditionally occurs early in one’s working life, eliminating the incumbent government’s education, infrastructure, and health costs.

In the USA migrants currently constitute 15% of the total population and make a significant financial contribution. 30% of all businesses, 40% of all fortune 500 companies, and 50% of unicorns (start-ups worth more than 1b) are founded by migrants. In the US, migrants are the most significant contributors to innovation and entrepreneurship, leading the US to the largest economy in the world.

Despite negative and false myths claimed by opponents of migration, migrants do not take locals’ jobs and burden society, as confirmed by endless and ongoing economic research.

Australian Economy Wins Through Immigration

Australia is considered one of the most prosperous nations globally, embracing migration from both a social integration of multiculturism and financial perspective. One-third of the entire population consists of migrants, the highest percentage of any country in the OECD. Australia’s population has doubled since the ’70s, and the economy has grown 22-fold as a result.

It comes as no surprise that Dominic Perrottet, former NSW treasurer and current Premier, is calling for net migration to increase from 160,000 (pre-COVID) to 400,000 persons yearly intake. This is to make up for a lost time during border closures as confirmed by the intergenerational report. A favourable migration policy will give the Australian economy an additional stimulus.

Additional immigration will also provide a cushion for the many other risks that our economy displays, such as inflation, boosting GDP, and especially alleviating labour constraints in hospitality, health, financial services, retail, agriculture, construction, property, and tech. Immigration enables the construction industry, making up 8.8% of our GDP, to continue and provides an essential multiplier effect on our broader economy. Construction in Australia has a multiplier effect of close to three: for every $1 million invested, an additional $3 million is generated in the economy as a whole.

Migration, in turn, increases productivity, creates further opportunities for innovation, and generates jobs.

The balance is altering migration to accommodate the current and future needs of the economy. Student visa programs require urgent attention, expansions to different regions, loosening up the financial dependency restrictions, scrapping the max 20 hours a week that students are allowed to work under the visa. Let’s not forget education was the 3rd highest contributor to the nation’s GDP before COVID hit; this should aid our ailing University sector and bolster our unskilled labour supply.

Historically Australia was the 2nd highest net migration nation, followed by Canada. Canada recently announced they wish to increase their net migration an additional 1% ($1m p.a.) to 2.8% of their population with an immigration blitz. Who is keen to capitalise on Scott Morrison’s proclamation (Global Talent Initiative) of attracting the smartest and brightest in the world?

Planning For The Future

We believe there will be an increase in volatility in the coming months, given the uncertainty with inflation, economic growth, and threat to asset prices, not to mention that the Australian economy needs to shift away from its dependency on China and mining.

Australia was Built on the Sheeps Back with wool being our main export from 1871 to the 1960s, Immigration allowed us to innovate and grow by maturing as a nation and building a diversified and innovative portfolio of industry’s in which we excel.

Perhaps our history has shown that insufficient credit is given to immigration policy and its positive economic outcomes being one of the key critical elements allowing the nation to emerge from dire economic circumstances as demonstrated from the 70’s crises to today’s phenomenal economic success.

When it comes to the right migration policy, it needs to be creating diversity and combination, not just accommodating skilled labour, but also refugees, students and other temporary/permanent visa holders.

Paul Miron has more than 20 years experience in banking and commercial finance. After rising to senior positions for various Big Four banks, he started his own financial services business in 2004.

MSQ Capital


Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts

Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

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Hong Kong Takes Drastic Action to Avert Property Slump

The city’s real-estate market has been hurt by high interest rates and mainland China’s economic slowdown

Fri, Mar 1, 2024 3 min

Hong Kong has taken a bold step to ease a real-estate slump, scrapping a series of property taxes in an effort to turn around a market that is often seen as a proxy for the city’s beleaguered economy.

The government has removed longstanding property taxes that were imposed on nonpermanent residents, those buying a second home, or people reselling a property within two years after buying, Financial Secretary Paul Chan said in his annual budget speech on Wednesday.

The move is an attempt to revive a property market that is still one of the most expensive in the world, but that has been badly shaken by social unrest, the fallout of the government’s strict approach to containing Covid-19 and the slowdown of China’s economy . Hong Kong’s high interest rates, which track U.S. rates due to its currency peg,  have increased the pressure .

The decision to ease the tax burden could encourage more buying from people in mainland China, who have been a driving force in Hong Kong’s property market for years. Chinese tycoons, squeezed by problems at home, have  in some cases become forced sellers  of Hong Kong real estate—dealing major damage to the luxury segment.

Hong Kong’s super luxury homes  have lost more than a quarter of their value  since the middle of 2022.

The additional taxes were introduced in a series of announcements starting in 2010, when the government was focused on cooling down soaring home prices that had made Hong Kong one of the world’s least affordable property markets. They are all in the form of stamp duty, a tax imposed on property sales.

“The relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.

The tax cuts will lead to more buying and support prices in the coming months, said Eddie Kwok, senior director of valuation and advisory services at CBRE Hong Kong, a property consultant. But in the longer term, the market will remain sensitive to the level of interest rates and developers may still need to lower their prices to attract demand thanks to a stockpile of new homes, he said.

Hong Kong’s authorities had already relaxed rules last year to help revive the market, allowing home buyers to pay less upfront when buying certain properties, and cutting by half the taxes for those buying a second property and for home purchases by foreigners. By the end of 2023, the price index for private homes reached a seven-year low, according to Hong Kong’s Rating and Valuation Department.

The city’s monetary authority relaxed mortgage rules further on Wednesday, allowing potential buyers to borrow more for homes valued at around $4 million.

The shares of Hong Kong’s property developers jumped after the announcement, defying a selloff in the wider market. New World Development , Sun Hung Kai Properties and Henderson Land Development were higher in afternoon trading, clawing back some of their losses from a slide in their stock prices this year.

The city’s budget deficit will widen to about $13 billion in the coming fiscal year, which starts on April 1. That is larger than expected, Chan said. Revenues from land sales and leases, an important source of government income, will fall to about $2.5 billion, about $8.4 billion lower than the original estimate and far lower than the previous year, according to Chan.

The sweeping property measures are part of broader plans by Hong Kong’s government to prop up the city amid competition from Singapore and elsewhere. Stringent pandemic controls and anxieties about Beijing’s political crackdown led to  an exodus of local residents and foreigners  from the Asian financial centre.

But tens of thousands of Chinese nationals have arrived in the past year, the result of Hong Kong  rolling out new visa rules aimed at luring talent in 2022.


Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts

Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

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