One plus one makes more than two: Our overlooked immigration benefits

One plus one makes more than two: Our overlooked immigration benefits

The problem with an excellent speech covering something as broad as the Australian economy is that valuable bits are overlooked when they deserve greater attention.

So it was with Luci Ellis' speech on Wednesday, titled "Where will the Growth Really Come From?".  Aside from being swamped by the marriage equality result, the Reserve Bank assistant governor was guilty of covering too much too well with that unfortunately rare thing outside the RBA, perspective.

While the headline from the speech was about growth, there also were valuable warnings about the folly of our apparently rising political tide of popularist/protectionist/anti-immigration ratbaggery.

As befitting the Stan Kelly Lecture, Ms Ellis delivered a brief and updated primer on the folly of protectionism. A single graph says much – it took the unwinding of protectionism to get Australian manufacturers out there, to make them world class.

But it was her gentle chiding of attacks on our immigration policy that reminded listeners and readers that simplistic views of complex issues don't deliver the full story. What the critics miss is that one plus one can add up to more than two.

And the anti-immigration chorus is growing. On top of the usual sectarian/xenophobic One Nation types and the Dick Smith/Club-of-Rome/anti-density brigade, immigration is carrying the can for housing affordability.


Even liberal commentators such as Ross Gittins are worried about our scarce physical capital being

Ms Ellis immediately acknowledged the thing that concerns such voices as Mr Gittins: "Of course, just adding more people and growing the economy to keep pace wouldn't boost our living standards."

And she then offered two reasons for not assuming that is all that happens:

"Firstly, recent migrants have a different profile to the incumbent Australian population. They are generally younger, and the youngest age group are significantly more likely to have non-school qualifications. This is possibly because so many recent migrants initially arrive on student visas and then stay. In line with that, service exports in the form of education have grown rapidly over the past few decades.

"Older migrants are on average less likely to have such a qualification than existing residents in the same age groups, but they are a small fraction of all migrants. The average education level of newly arrived Australians is actually higher than that of existing residents, precisely because they are younger. So Australia's migration program is structured in a way that, in principle at least, it can grow the economy while raising average living standards.

"Secondly, increasing economic scale is not neutral. There is more to it than just getting bigger. This is the lesson of what is sometimes called New Economic Geography: scale economies arise from product differentiation. Bigger, denser cities are more productive. Perhaps more importantly, larger population centres allow more variety in the goods and services produced."

As well as citing recent research, Ellis went back to 1776 and the father of economics, Adam Smith, for support:

 "There are some sorts of industry, even of the lowest kinds, which can be carried on nowhere but in a great town. A porter, for example, can find employment and subsistence in no other place. A village is by much too narrow a sphere for him; even an ordinary market town is scarce large enough to afford him constant occupation."

Ellis said that as with porters, so it also was with management consultants, medical specialists and a myriad of other occupations that could only be sustained in a large market.

In effect, Ellis was applying wider vision to be able to see that one plus one equals more than two.

The bigger, denser cities that Dick Smith hates are great sources of innovation and productivity growth. And the bright lights, big city continues to attract the young, the creative and the innovative.

Yes, the bigger population requires bigger, smarter infrastructure investment to provide quality of life and keep the Big Smoke functioning effectively. We are fortunate to be a young, rich country that can afford to both deepen and widen our capital – if we have the vision, the will and the leadership capable of explaining it, of bringing the electorate along instead of retreating to the lowest common denominator of echoing One Nation.

Our migrant story is too rich, we have gained too much from it, to lose perspective and betray it. Thank you, Luci Ellis.