Friday, 5 April 2013

Why immigration is good for Australia

Since being elected as prime minister of Japan, Shinzo Abe has worked to stimulate the economy, which has been shrinking for the past couple of decades. He now has a new head of the Bank of Japan. Haruhiko Kuroda says the BOJ will now "aggressively buy longer-term bonds and double its holdings of government bonds in two years" and the stock market, the Nikkei, jumped on the news, closing 2.2 percent higher.
The Japanese financial markets appeared to give a collective sigh of relief, with their rise in recent months seemingly justified by Mr. Kuroda’s strong positioning. Japanese stocks have soared in anticipation of a reversal in monetary policy under Mr. Abe, fanned higher by recent assurances from Mr. Kuroda that he would do “whatever it takes” to defeat deflation.
Further down in this New York Times story there's mention of Japan's massive government debt, which currently sits above 200 percent of GDP. That's higher even than Italy's public debt.

The dynamics of Japan's economy are very strange for the outsider, but when it comes down to it the real problem is a demographic one. Here's a snapshot of Japan's births and deaths, from Wikipedia.

And the government is not using immigration to ease the fiscal death-spiral. Instead, it is taking on more debt, effectively removing responsibility for reversing the country's economic crisis from the market and embedding it in sovereign debt. It's hard to see how inflation cannot result from this strategy in the longer term, an outcome that would crush the Japanese economy.

But the Japanese government refuses to do anything to ameliorate the trend. The number of immigrants in Japan today is just over 2 million in a total population of 128 million. And it is furthermore virtually impossible for such people to gain Japanese citizenship. Japan's restrictive regulations on immigration and citizenship are strangling the country's economy.

By contrast, Australia's net overseas migration was about 170,000 in 2010-11 alone, and this figure is similar to adjacent years, which means that Australia is welcoming just under one percent of its total population each year. Government debt in Australia is equal to about 11 percent of GDP.

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