“Population Ponzi” delivers “a nightmare of high debt, high taxes”


For years, I blasted Victoria’s ponzi scheme, which depended far too much on the extreme population increase fueled by immigration to spur growth. This has always been unsustainable and resulted in a drop in the standard of living of residents in place in the years leading up to COVID.

Anyone who disputed these facts had only to look at the charts below showing Victoria’s weak export growth, booming imports, and her sharply deteriorated trade balance:

Sluggish exports, booming imports.

Victorian trade deficit

Gigantic trade deficits.

This rampant population growth has created all kinds of problems for Melbournians, ranging from overwhelming infrastructure and congestion to deteriorating affordability and quality of housing. Importantly, it also masked the poor performance of the Victorian economy.

While overall gross government product (GSP) growth in Victoria was strong, driven by strong population growth, the GSP per capita stagnated in the 11 years following the global financial crisis (GFC):

Growth of the Victorian SGP

Victoria’s per capita growth was anemic.

The situation was so bad that Victoria experienced the weakest growth in GSP per capita in the country in the 11 years since GFC:

Victorian economic growth

In the 11 years since the GFC, Victoria’s per capita growth has been the worst in the country.

Victoria also experienced the second lowest growth in gross state income per capita in the 11 years following the GFC:

Victorian State Gross Income

Victoria’s real gross income growth in the 11 years since GFC was the second worst in the country.

Victoria also experienced the lowest growth in real gross household income per capita in the 11 years following the GFC:

Gross income of Victorian households

Real gross household income per capita in Victoria was the lowest in the country in the 11 years following the GFC.

And Victoria easily experienced the weakest growth in household income in the 29 years through 2019:

Real gross household income per capita

Victoria’s real gross household income growth has been excruciating.

Worse yet, Victoria’s gross household disposable income per capita was the lowest in the country in June 2019, even worse than Little Tasmania:

Gross disposable income of households

Victoria’s gross household disposable income was the lowest in the country before COVID.

Melbourne also has the second-lowest median income on the continent, beating only modest Adelaide:

Median income by capital

Melbourne’s median income is low.

After spending many years warning about Victoria’s ponzi scheme and being ignored by all, Stephen Anthony – chief economist at Macroeconomics – finally endorsed my point in a article written for FRANCE.

Anthony claims that “A Ponzi scheme followed by a bloated construction boom has left a nightmare of high debts and high taxes.” for Victorians:

For a decade or more, Victorian governments relied on one engine of growth: population. This emerged in two distinct phases.

Around 2007: quadruple influx of people to Victoria. This has seen average annual inflows rise from around 20,000 to 80,000 through 2020, combined with lax or absent planning at local, state and national levels. The result was over a million “unexpected” arrivals compared to official projections. The results were clear: lower standard of living per capita; strangled roads; crowded trains; unaffordable housing. Gone is the “most livable city in the world”.

Circa 2016: Deployment of the list of “major projects”: after having ensured that public infrastructures and services could not keep pace with demand, it was time to strengthen political support by buying a few votes…

The larger the project, the less competition and transparency there is, as planning processes are often bypassed. Large projects that lack feasibility studies, business cases and costs… Large inefficient projects will overwhelm future generations with hundreds of billions in debt…

So why did successive Victorian state treasurers get involved in this Ponzi scheme? It is certainly better to work for a living (also known as real policy reform). Strong population growth generates momentum for construction (in fact Clayton’s industrial policy), fuels house prices, which benefits existing owners (both homeowners and institutional investors).

The strategy is adopted by the powerful real estate lobby and the main unions. It rakes in significant exceptional revenues thanks to stamp duties and property taxes and offers greater fiscal hold. All this without a difficult decision and without courage.

Victoria’s decline began when the Howard government stepped up the temporary visa migration program after the defeat of Work Choices …

Unfortunately, this approach has become a permanent political framework. It kept real wages down and helped limit productivity growth through the uber -ization of low-skilled labor. All of this went against expert advice (think of Dr. Ken Henry and his framework for public participation in productivity, and the work of the Productivity Commission).

An economic model based on mass immigration is a stupid economy. It puts overall growth ahead of improvements in productivity, sustainability and per capita living standards. In Victoria’s case, it also sucks financial resources from other states in order to support its burgeoning population.

Oddly enough, those who claim that high immigration supports the federal budget by providing tax revenue still ignore the costs to state governments and citizens, as Victoria pointed out.

Policymakers must abandon the model of mass immigration in favor of productivity at the center of their concerns if they are to raise the standard of living of residents in the future.

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