This 12% pay rise simply isn’t worth it

Tuesday, 9 October 2018
Melbourne, Australia
By Bernd Struben

  • $3.4 trillion per year
  • Warming, cooling, or stagnant, there’s money to be made
  • ‘When an Insult Leads to a Death Sentence…’

Say goodbye to coal, cars and cows. And say hello to 6.8 million new migrants. All by 2050.

That’s the happy news we digested over breakfast this morning…along with some toast.

First, the Big Australia picture. One which conveniently ignores the social and environmental impacts of indefinitely welcoming 200,000 new migrants a year.

Instead, The Sydney Morning Herald reports that Professor Peter McDonald warns ‘future generations would pay for heavy cuts to immigration’.

The article continues:

A severe cut to migration would deprive the country of up to 6.8 million workers by 2050 while scaling back economic growth, highlighting the danger of a steep decline in the intake.

Australia’s economic output would be 12 per cent higher in 2053 in per capita terms with an annual intake of 180,000 migrants compared to a halt to the program, according to the findings from the Australian National University and the University of Melbourne…

His [McDonald’s] latest conclusions confirm that annual net overseas migration of about 200,000 a year would help address the ageing of the population, and lead to about 20.5 per cent of Australians being over the age of 65 by 2051.

The percentage of the population over 65 would rise from 15 per cent today to almost 27 per cent in 2051 if the door was closed on migrants, putting a greater burden on the rest of society to fund pensions and services for those who have retired.’

Wow. Can you sense the impending doom if Australia even considers reducing its immigration numbers?

If you answered yes, drop me some mail at letters@portphillipinsider.com.au because I sure don’t.

Trying to predict GDP figures 35 years down the road is like trying to predict the climate in 35 years…but we’re getting ahead of ourselves.

So, let’s be generous and give the researchers the benefit of the doubt.

That would mean a 12% greater rise in GDP by bringing in 6.8 million new migrants (who presumably will have children too), rather than cutting net migration to zero.

Now the 12% GDP benefit is quoted as ‘per capita’. Though you can bet it won’t be evenly distributed. But let’s say your paycheque — or you kids’ or grandkids’ — is indeed 12% higher in 2053 under the mass immigration model.

Instead of earning $60,000 you’d be earning $67,200 (inflation adjusted). That’s a nice little pay rise. Though after the government takes its 32.5% share, you’re only left with an extra $4,860.

Still, that’s better than nothing. Until you factor in all the additional costs that come with 6.8 million new migrants.

There’s the obvious added congestion and increased spending on infrastructure. But how about housing, food, and energy costs?

The simple rule of supply and demand dictate those costs will go up. Possibly by enough to erode all your pay rise…or more.

Atop spruiking the benefits to your bank account, the researchers trot out another tired slogan. You know, the one that says migrants will keep Australia’s population from ageing.

Apparently if Australia were to cut immigration to zero, 27% of Aussies would be over 65 by 2051. By bringing in 6.8 million migrants that can be reduced to 15%.

That is a significant difference. Though by 2051 automation and robotics will likely have evolved to where the burden on working age folks to care for the oldies will be quite different than today.

But when you’re talking about heavy prices due to be paid by future generations, why limit yourself to the next generation or two?

Tackling society’s ageing issue by bringing in 6.8 million migrants is the definition of a Ponzi scheme. Unless these new migrants discover a fountain of youth, they’re destined to age as well. Then what’s the plan?

In my…erm…humble opinion, it’s better to start facing up to these issues today than kick the can down the road for future generations to sort out.

As for the 12% pay rise?

If it means giving up cars, hamburgers, and abundant affordable energy…you can keep it.

More, after the markets…

Markets

Overnight the Dow Jones Industrial Average closed up 39.73 points, or 0.15%.

The S&P 500 fell 1.14 points, or 0.04%.

In Europe the Euro Stoxx 50 index finished down 35.79 points, or 1.07%. Meanwhile, the FTSE 100 lost 1.16%, and Germany’s DAX closed down 164.74 points, or 1.36%.

In Asian markets, Japan’s Nikkei 225 is down 277.84 points, or 1.17%. China’s CSI 300 is up 0.31%.

In Australia, the S&P/ASX 200 is down 61.91 points, or 1.01%.

On the commodities markets, West Texas Intermediate crude oil is US$74.28 per barrel. Brent crude is US$83.86 per barrel.

Turning to gold, the yellow metal is trading for US$1,190.41 (AU$1,683.03) per troy ounce. Silver is US$14.40 (AU$20.36) per troy ounce.

One bitcoin is worth US$6,629.72.

The Aussie dollar is worth 70.73 US cents.

$3.4 trillion per year

The Big Australia promotion resonated with me this morning, partly because it came hand in hand with a new report from the UN’s Intergovernmental Panel on Climate Change.

The UN’s boffins are similarly trying to tune their crystal ball in on 2052. While they’re at it, maybe they can tell us the weather forecast for the coming Christmas holidays.

Wait…that’s too far away to predict?

Nonetheless, to avoid their prophesied global catastrophe, we’re in for some serious and expensive belt tightening and lifestyle changes. All why ushering in 2.2 billion additional people expected on Earth by 2052.

The report, as quoted by The Australian, recommends, ‘actions that can reduce emissions include: phasing out coal in the energy sector, increasing the amount of energy produced from renewable sources, electrifying transport and reducing the carbon footprint of the food we consume’.

Reducing ‘the carbon footprint of the food’ you consume, by the way, means no more beef. Climate warriors have already targeted Australia’s cattle for their ignominious flatulence. Not to mention how much grain those suckers eat…grain you could be eating instead of that juicy steak.

‘Electrifying transport’ isn’t as exciting as it sounds either. It means the global police are coming for your combustion engine car.

Then there’s the call to phase out coal — of which Australia is the largest global exporter — by 2050. The authors, perhaps, are unaware of the data from Urgewald, a German environmental group. According to Urgewald, quoted in The Australian: ‘1600 coal plants are planned or currently under construction in 62 countries… The new plants will expand the world’s coal-fired power capacity by 43 per cent.’

The report highlights the tremendous cost of doing nothing…and the apparently higher cost of going all in to keep global temperatures from rising more than 1.5 degrees Celsius.

From The Sydney Morning Herald:

The cost is astronomical. The damage over the years to 2100 would reach $US54 trillion in today’s dollars if warming was kept to 1.5 degrees. The cost would climb to $US69 trillion if warming reached 2 degrees.

That’s the cost of doing nothing. So how much do the UN experts want the world — read developed nations — to shell out to avoid this potential catastrophe?

US$2.4 trillion (AU$3.6 trillion) per year by 2034.

I may be missing something, but according to my maths that works out to US$158.4 trillion by 2100 if the world unites to fight climate change. And $69 trillion if we do nothing…

Warming, cooling, or stagnant, there’s money to be made

Whatever the outcome is over the coming decades, some investors will lose money while others will realise some fat gains.

Classic investments in this field include companies involved in renewable energy sources, rare earths miners, and electric vehicle manufacturers.

But many people are sceptical that humans have the ability, much less the will, to impact rising temperatures. And some investors are changing gears to address that possibility.

From Bloomberg:

“There is no way at this point to stop climate change,” says James Everett, partner and co-founder at Ecosystem Integrity Fund, a venture capital investor in San Francisco. “Pretty much every system is going to have to change. We’re going to have to adapt to this.”

If droughts and storms do indeed intensify, this will have a big impact on agriculture on a planet that soon will boast 10 billion people. That could be a boon to stocks involved with indoor growing operations, for example.

And while some insurance companies will be caught flatfooted, nimble providers could see big growth in the demand for their services.

Then there are ocean front properties, which might not be the best long-term investment if sea levels rise. While properties higher up the hill may be all the rage.

And let’s not forget the industries involved in seawalls, and the institutions or governments that will fund them.

Also from Bloomberg:

“A storm surge barrier system protecting New York City and parts of New Jersey could cost $2.7 million per meter,” Michael Cembalest, the asset manager’s chairman of market and investment strategy, wrote in his annual “Eye on the Market” energy newsletter in April. He added that governments would probably struggle to pay that cost, perhaps turning to either bonds or outright privatization.

That’s all the time we have for today.

Tune in tomorrow when we’ll have a look at something called ‘The Choppiness Index’.

Some crypto analysts believe this index may be able to predict the future price of bitcoin.

I’ll be sure to ask our in house crypto gurus, Sam Volkering and Ryan Dinse, their thoughts before getting back with you.

Finally, here’s the latest in religious zealotry from The Australian Tribune:

‘When an Insult Leads to a Death Sentence…’

One of the biggest mistakes you can make is becoming emotionally fixated on an icon.

That could be a national flag like the US’ Star Spangled Banner, a spiritual symbol like the Christian cross, or a historical figure like Islam’s founder Muhammad.

It’s fine to revere these symbols…as long as you remember that’s all they are. A representation of what you believe in. Distancing yourself emotionally from your icon of choice will give you…

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd