Powering Australia’s Economic Surge

Voters at a polling station in Sydney, Australia, in July. Rick Rycroft/Associated Press
Voters at a polling station in Sydney, Australia, in July. Rick Rycroft/Associated Press

If you were designing a nation from scratch, it would look something like Australia. A Eurasian people, boring politicians, and an economy that virtually runs itself.

Australia, uniquely, has avoided every major shock of modern globalization. Its economy mostly kept growing through the Asian financial crisis in the late-1990s, the tech crash at the turn of the millennium and the global financial crisis of 2008.

While other wealthy nations struggle to define their purpose, Australia has unlocked the secret to its next wave of prosperity. The key is the very thing that intimidates the United States, Britain and most of Europe: large-scale immigration.

Led by students from India and young professionals from China, new arrivals have managed to extend Australia’s winning streak for longer than any policy maker imagined.

It has been 25 years since the last recession in Australia. This growth period can be divided into three distinct phases.

The first phase, from 1991 to the end of the decade, was hard-earned. It was driven by the surge in productivity from the economic reforms of the 1980s and early 1990s but left many people behind. The second phase, from 2003 to 2008, didn’t require as much effort. China set off the greatest mining boom in modern Australian history, and income flowed freely. But this proved to be a short phase in the long-growth period. It ended with the financial crisis.

Before the market-based reforms of the mid-1980s, Australia was one of the most regulated economies in the world, and the inflexibility of the system made it vulnerable to global setbacks. A collapse in Australian export prices would herald a deep recession.

History didn’t repeat itself at the end of this mining boom because the open economy was able to quickly tap a new source of growth through immigration. The reforms — initiated by the Labor governments of former prime ministers Bob Hawke and Paul Keating — gave up political control of the Australian dollar, interest rates and wages and removed the tariff wall. They were balanced with universal health care and a high minimum wage.

Subsequent conservative and Labor governments then adapted the program to immigration policy — and this explains the third phase of Australia’s remarkable 25-year run of growth. Since 2001, governments have largely let the market decide whom to bring into the country.

They did this by declaring a preference for skilled immigration over family reunion when granting permanent settlement. Twenty years ago, only 30 percent of immigrants were skilled. Today they account for 70 percent of a much larger number. A second group of immigrants was recruited through temporary visas: students, holiday makers and workers on short-term contracts. Australia now has about 750,000 people on temporary work visas, according to my research, accounting for 7 percent of the nation’s work force.

Both doors, for permanent and temporary immigrants, remained open throughout the financial crisis. Around half of the 190,000 permanent settlers in Australia each year are from the existing pool of temporary-visa holders.

The economist Bob Gregory calculates that almost all of the additional full-time jobs created since 2008 have gone to overseas-born workers. Many of those immigrants are in the professional work force, including accountants, architects, computer programmers, doctors and scientific researchers.

The surge in immigration has allowed Australia to continue to climb the income ladder when most other rich nations have been losing ground. In 2001, Australia was the 15th largest economy in the world. Today it is 13th.

In doubling the number of immigrants it receives each year, the country has transformed its ethnic face, from predominantly white to Eurasian. Fifteen years ago, migrants accounted for 23 percent of the total population, with Europeans the dominant group at 6 percent. Today, the overseas-born are 28 percent of the total population, with those from Asia accounting for more than 10 percent. No other nation looks like Australia today.

Beneath this national snapshot is another remarkable story. One of the fastest growing groups in Australia is Americans.

The United States rarely loses more people to another country than it receives. It is a destination for migrants, not a source. But over the past 15 years, the American population in Australia has almost doubled, from just over 50,000 to more than 100,000, while the Australian population in the United States increased by around 15,000 to 95,000.

The Americans are coming to Australia for much the same reasons as the Chinese, Indians and Europeans: well-paid jobs and a high quality of life. And they are being recruited in the same way: They start with a short-term posting and then decide to become Australians.

Mainstream politicians have played their part by resisting whatever temptation there might have been to demonize the new arrivals for electoral gain. There has been little public backlash against immigrants. Donald J. Trump and Theresa May, the British prime minister, should take note.

The catch has been that national and state governments were too slow to expand the infrastructure to cater to the growing population. The political system had grown complacent during the windfall years of the mining boom. Budget surpluses were returned to voters as handouts, instead of reinvested in transportation, schools and hospitals. When the mining boom ended, the federal budget tumbled into deficit. Now, the cost of correcting those earlier errors is much higher than it should have been. The property market is also inflated, and it may yet bring down the entire economy.

Nevertheless, these are problems of growth that most rich nations would kill for.

Australia’s immigration policy has one major flaw: its treatment of asylum seekers, who are either turned back at sea or intercepted and transported to an offshore detention center. The policy has been ruthlessly effective at stopping the boats, but it is also undeniably cruel.

The country’s political leaders believe a tough refugee policy is a precondition for an open immigration policy. They could not have doubled the immigration flow without securing the border, they claim. While the message may resonate locally, it compromises Australia’s ability to act as a role model for openness.

That’s unfortunate because we have a valuable lesson to share with the world: Immigration fosters resilience.

George Megalogenis is an author and commentator. His latest book is Australia’s Second Chance.

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