Charging for Australian citizenship would fix the deficit and help migrants

Charging for Australian citizenship would fix the deficit and help migrants

Charging for Australian citizenship would fix the deficit and help migrants

November 24, 2016

Last month the government and Labor, with my support, agreed to changes that boosted the budget by $6 billion over four years. That’s good, but it’s only a baby step.

This year’s budget deficit is estimated to be $37 billion. And the government’s net debt is rapidly approaching $300 billion, leaving Australians paying around $1 billion each month just on interest. This means every man, woman and child has to find the equivalent of $500 a year for a big chunk of nothing. It’s a terrible waste and it exposes us to great risk in an economic downturn.

Last year I persuaded the government to instruct the Productivity Commission to investigate the possibility of charging non-humanitarian immigrants for permanent places in Australia – a concept originally developed by the Nobel Prize-winning economist, professor Gary Becker.

The commission’s final report calculates that if our non-humanitarian intake of 190,000 immigrants were each charged around $50,000, Australia could generate around $9 billion a year. Factor in our proposed changes to social security eligibility, which would largely restrict welfare to citizens, and we could put a total of $25 billion towards budget repair each year.

If the government managed to stay on track with other savings, it would enable us to wipe Australia’s deficit in only two years. Soon after that, we could put it towards tax cuts, inevitably leading to economic growth and more and better jobs.

All of this is possible with no change to our refugee intake. Indeed, with the improved fiscal situation we could afford to increase the number of people offered protection. Most refugees are very expensive to settle in Australia.

Those wanting to come to Australia for a better life, but who are not genuine refugees escaping persecution, could base their decision on economic considerations – will they do well enough in Australia, despite having no access to welfare, to justify paying the immigration fee?

Those who made the decision to come would arrive in a financially stable country that is not passing on a legacy of debt to its children.

Cautious approach

The Productivity Commission is very cautious about the idea, arguing that skilled immigrants would prefer to settle in countries that did not charge an immigration tariff. This assumes that the current bureaucratic pathway for gaining entry as a skilled migrant is costless and the bureaucrats are good at choosing the right skills. It also assumes that other countries are equally attractive and the immigration tariff would be the determining factor. I would challenge these claims.

But even if they are valid, there are various ways in which they can be overcome. One is to trial an immigration tariff and welfare ban on migrants who arrive under the family reunion program. Family reunion immigrants tend to be less skilled and more likely to impose a cost on the economy, so the idea of charging them a fee to enter Australia makes obvious sense.

In the long-term the best option is to make Australia more attractive to skilled immigrants than other countries. This could be achieved by lowering income and company taxes, removing the red tape that inhibits entrepreneurs from establishing new businesses and abolishing barriers to free trade.

Such measures would benefit all Australians, but would have a particularly significant effect on skilled migrants seeking a better life. Coupled with our geographic and lifestyle options, it is difficult to see too many potential migrants going elsewhere.

Given that Australia already charges for visas, in some cases quite significant amounts, it is difficult to see why this proposal should not be embraced. The only question is whether the price of $50,000 is right. An annual auction for a designated number of places could easily determine that.

New ideas often find little support in Australia unless they have been tried in other parts of the world. This is a shame because it holds us back. On the subject of immigration, there is quite a lot that Australia could teach the rest of the world. If we were to implement an immigration tariff, restrict welfare to citizens and use the proceeds to balance the budget and reduce tax, we could lead the world.

David Leyonhjelm is a Senator for the Liberal Democrats

First published in the Australian Financial Review