Chapter 16 - Immigration and environmental policies

Question 1

How many people have migrated to Australia since 1945?

Answer 1

Since 1945, more than seven million people have migrated to Australia, having a significant influence on society and the economy, with the population increasing by approximately 7 million to over 24.1 million in May 2016.

Question 2

What did the Intergenerational Report highlight in regards to population growth and the participation rate?

Answer 2

The latest Intergenerational Report released by the government in May 2015 highlighted that annual population growth over the next 40 years (1.3%) will be slower than population growth over the last 40 years (1.4%).

In addition, Australians over 65 are projected to more than double by 2054-55 and the participation rate is expected to fall from is current rate of 64.8% (April 2015) to 62.4%.

Question 3

What are the three main immigration reasons?

Answer 3

• Skilled Stream Migrants
• Family
• Humanitarian

Question 4

How does skilled immigration affect Australia’s population?

Answer 4

Australia’s ageing population has made it imperative that population growth increase in order to protect against the declines in the labour force participation rate. A lower participation rate is projected to have a negative influence on AS, meaning that future economic growth will rely heavily on improvements that can be made to the size of the (skilled) population - primarily through immigration policies.

Question 5

How does skilled immigration affect Australia’s ​participation rate?

Answer 5

Between 2000 and 2010, Australia’s labour force participation rate increase from 63.1% to 65.9%, with 94% of the increase accounted for by the arrival of skilled migrants. It is projected to decline in the future, and without skilled immigration, a decline would accelerate the decline in economic growth and budget pressures that are anticipated in the future.

Question 6

How does skilled immigration affect Australia’s ​productivity?

Answer 6

Skilled migrants tend to have a positive influence on Australian rates of productivity growth because, on average, they are more likely to be higher skilled than the average Australian worker and arrive with the experience and flexibility of having worked in different environments, conditions and circumstances.

Question 7

Outline Australia’s skilled immigration program.

Answer 7

The Australian skilled immigration program (2/3 of all immigration) is designed to target migrants who have skills or outstanding abilities that will contribute to the Australian economy with most being required to pass a ‘points test’ to demonstrate the benefit they will bring to Australia.

There are four major categories of skilled migrants:

• General Skilled Migration (34%)
• Employer Nomination/Sponsorship (60%)
• The Business Skills Migration (6%)
• Distinguished Talent (1%)

Question 8

What are the immigration trends​ over the recent years?

Answer 8

After peaking at 300,000 in 2009, net overseas migration fell to approximately 170,000 (2011) which is similar to 2006 levels.

Since then, total immigration targets have crept up a little and for the last two years have been 190,000 (with 68% being skilled migrants).

Question 9

What are the types of skilled immigration visas?

Answer 9

The focus on expanding aggregate supply is the skilled stream that boosts Australia’s labour supply and fills skills shortages;

• Section 189 - Skilled Independent Visa (permanent)
• Section 186 - Employer Nominated Scheme (permanent)
• Section 187 - Regional Sponsored Migration Scheme
• Section 457 - Temporary Work (skilled) visa
• Section 188/888 - Business Innovation and Investment Program

Question 10

How does immigration affect AS?

Answer 10

• increase the supply of labour, placing downward pressure on wages, boosting employment and output
• further enhance productivity via the intake of young skilled professionals to replace the ageing population and retirees
• result in of ‘economies of scale’ benefits being enjoyed by some firms as a bigger population adds to output growth
• increases the connectedness with overseas markets, helping to facilitate export growth over time.

Question 11

How does immigration affect the achievement of government goals?

Answer 11

• Sustainable economic growth: expansion of skilled labour, immigrants can also bring with them acquired skills and knowledge of capital
• Low Inflation: by adding to the supply of (skilled) labour, immigration helps to reduce labour shortages and prevent wage pressures and inflation from accelerating
• Unemployment: overall, immigration fills shortages, and thus migrants spend on G+S (AD) increasing growth and employment - does nothing to help structurally unemployed.
• External Stability: immigration fills labour shortages, keeping real unit labour costs low and thus keeps Australia internationally competitive. Immigrants are also more likely to spend on imports (home country) thus worsening the CAD. Both effects are likely to cancel each other out.
• Equity in the distribution of Income: immigration exerts an upward pressure on the affordable housing market, however, if immigration is filling skill shortages it helps to contain inflationary pressures elsewhere, therefore real incomes will be maintained.

Question 12

What are the benefits of immigration on living standards?

Answer 12

• increases multiculturalism
• provides for a better defence capability
• increased amounts of government revenue help to fund a host of government services.
• economies of scale (larger population)
• improves our ‘self-worth’ and ‘moral standing’ - humanitarian intake

Question 13

What are the costs of immigration on living standards?

Answer 13

• the strain on the nation’s physical and natural capital, such as infrastructure and natural resources, adding to congestion and resource depletion
• the household affordability problem in Australia as the demand for housing further increase in a climate where the supply of housing cannot keep up with the existing demand
• potential pressure on social cohesion
• the possibility of a decline in Australian working conditions
• the loss of important social infrastructure over time, such as reduced land use for parks and recreation

Question 14

How are living standards connected to environmental policies?

Answer 14

Living standards, both material and non-material are linked to the quality of the natural environment as the economy is a sub-system of the environment and that the environment therefore needs to be protected so that the economy can function.

Question 15

What are the potential costs associated with climate change?

Answer 15

• Increased damage from hurricanes and typhoons
• more intense and prevalent heat waves leading to a loss of lives and agricultural produce
• the incidence of drought may be more pronounced, leading to significant reductions in output
• drier and hotter summers may have negative impacts on rainforests and the flora and fauna in them
• mass coral bleaching of the great barrier reef

Climate change is a market failure that has the potential to reduce future rates of economic growth and in some cases significantly reduce material and non-material living standards.

Question 16

What are Australia’s future emissions reduction targets?

Answer 16

In April 2016 the Australian Government signed up to the ‘Paris Agreement’ along with 150 nations. This is an agreement by most of the world’s nations to limit future warming to 2 degrees Celsius by 2100.

Australia had previously committed to reducing greenhouse gas emissions by 5% by 2020 but the Australian Federal Government has now committed to cut Co2 emissions levels from 2005 by 26%-28% by 2030.

Question 17

What are the 4 main ways the government can combat climate change?

Answer 17

• Renewable Energy Target
• Carbon Tax
• Emissions Trading Scheme
• Direct Action Plan

Question 18

What is an Emissions Trading Scheme?

Answer 18

An Emissions Trading Scheme (ETS) is the most efficient theoretical method of combating the threat of climate change. An ETS involves a government determining a base level of carbon emissions it will tolerate in the economy. The government then provides or sells a certain number of permits to businesses allowing them to release Co2 into the atmosphere and enforces penalties for polluting without permits. Once the permits are held by businesses, they can sell some of these to other businesses (polluters), and a ‘carbon market’ develops, with a demand, supply and price for carbon.

Over time, the government reduces the number of permits in existences (effectively reducing supply), forcing up the price of Co2 permits, and providing further incentives for businesses to reduce their Co2 emissions.

Question 19

What is a carbon tax and the ‘carbon tax package of 2012’?

Answer 19

A carbon tax requires carbon emitters to pay a set amount of tax per tonne of carbon released into the environment. Like an ETS, it effectively places a price on carbon and causes a substitution away from dirtier production methods to cleaner or greener ones.

The Carbon Tax Package (2012) - repealed in July 2014 - was to tax around 500 of Australia’s biggest polluters. “For the first three years, the carbon price will be fixed like a tax, before moving to an emissions trading scheme in 2015”. The carbon price was to be set at $23 a tonne, rising at 2.5% a year till 2015.

Question 20

What is Direct Action​?

Answer 20

• $2.55B over 4 years invested into an Emissions Reduction Fund.
  
  • currently being used to incentivise economic agents to purchase low-cost abatement measures
    
    • business investment into renewables
    • assisting households to reduce their ‘carbon footprint’
• Three Key elements; crediting emissions reductions, purchasing emissions reductions, and safeguarding emissions reductions.

Direct action will reduce carbon emissions via a ‘reverse auction’ process where the government will provide funds for the cheapest emissions reductions commitments.

Question 21

What is the ​Renewable Energy Target?

Answer 21

The government’s Renewable Energy Target (RET) was for 20% of Australia’s energy requirement coming from renewable sources by 2020.

• new RET of 33,000 GWh by 2020 (23% approx.)

RET works by forcing energy providers to source 20% of their energy from renewables, either by creating renewable energy or buying certificates from renewable energy providers.

Question 22

Potential benefit of Direct action and RET vs. the Carbon Tax/ETS

Answer 22

Direct action is being used to target emissions across the whole economy, whilst the RET is being used to target emissions created specifically in the electricity sector. Targeting the whole economy and finding ways to reduce energy use and emission per unit of output (emissions intensity) may be more effective and less damaging to the economy than just focusing on energy production because it provides the potential for greater savings at lower costs and potentially less damage to industry and our international competitiveness.

Question 23

Comparison of Direct Action and Carbon Tax/ETS

Answer 23

Both an ETS and a carbon tax are like ‘the stick’. They are designed to disincentivise the production of carbon emissions by raising the costs of production and consumption of carbon-intensive goods and services.

Direct Action is like ‘the carrot’, providing financial incentives to reduce carbon emissions.

Question 24

The Carbon Tax vs. an ETS

Answer 24

Both the carbon tax and the ETS help to reallocate resources to the use of alternative forms of energy, resulting in cleaner production over time.

• Carbon Tax - targets the price of carbon
• ETS - targets the volume of carbon

Fundamentally, the ETS has the advantage of greater control over the actual level of carbon pollution.

Question 25

Balancing Long-term prosperity with short-term costs.

Answer 25

Reducing carbon emissions through one or more channels is designed to combat the costs of human-driven climate change. However, the reduction in emissions can be challenging as it can have short-term negative effects on living standards. The government needs to balance the short-term costs of abating climate change vs. the long-term prosperity of the Australian people.