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$5m to gain an Aussi visa

Government policy is now allowing businesspeople who will make a business investment of $5m in Australia to gain entry to Australia as an immigrant. Critics have described the policy as an immoral sale of entry rights.  It isn’t really. The policy in the main provides a signal of the applicant’s entrepreneurial or business skills which are difficult things to identify.  Since the $5m investment remains the property of the applicant, interest income from the investment proceeds to him or her.  Australia then gets effectively zilch, at lerast from the investment  – preexisting Australian residents get nothing and all income goes to the new entrant so it is a policy of seeking to signal skills and hardly a policy of “selling’ visas.   To the extent that capital markets are perfectly mobile internationally the $5m investment will induce a capital outflow of $5m so there is no net addition to the local capital endowment either.  All investment gains – apart from business skill externalities – accrue to the newcomer and australia does not end up with a larger capital stock.

One qualification to this story is that State Government’s have the opportunity to direct where the $5m is invested and they might well choose local public projects which yield a lower rate of return than private sector projects.  This does represent a transfer to the state – if the implied subsidy was 1% of the investment it would amount to $50,000 annually. In addition the Federal Government does collect income taxes on any interest earned although some of this one would expect is returned to the migrant as public goods.

In addition skilled entrepreneurs will generate jobs for others and will have income distributional impacts that fall on the well-heeled rather than the unskilled end of the workforce. They will also buy other nontraded goods and assets from residents providing further gains from trade.

I am not particularly concerned about such a program. I’d certainly prefer it to the wholesale recuitment of low productivity, low education entrants who either live on Australia’s social security system (or  in our jails) while simultaneously despising our democracy and resenting the fact that their religious fanaticism is only one of many myth systems allowed to operate in Australia.

3 comments to $5m to gain an Aussi visa

  • derrida derider

    Everything old becomes new again. The Hawke government in the 1980s had an almost identical program, only the required amount was $500,000. It was abandoned because it was extensively rorted. It is relatively easy to have temporary paper wealth, especially if the money is borrowed and you neglect to account for your debts. In the 1980s the borrowing was often from an extended family; once the visa was gained the funds would be recycled to another cousin to get another visa. Even where the money was kosher it tended to be taken up by people more interested in having a bolthole available just in case than in actually building a business in Australia. It was very popular with Hong-Kongers anticipating the Chinese takeover.

    As for the last sentence, Harry, all I can say is that you have got to quit listening to shock jocks and get yorself some facts about who we let in and how they end up faring. AS I’ve noted before the great bulk of refugees end up as wonderful citizens precisely because they are desperate to build a new life.

  • hc

    The last comment Derrida is not fair. I have worked on the economics of migration for over 20 years – two books and numerous articles on the topic. i don’t listen to shock jocks at all. And i am thinking here of sections of the Family Program as well as the refugee and humanitarian component. There are identifiable ethnic-religious groups with poor labour market outcomes and with high crime rates and with high welfare dependency. they do despise our democracy, our judicial system, our women and out tolerance for religions other than those of the bigots who arrive here.

  • Jim Rose

    Every government programme will have fraud and instances of poor administration. That is no reason to not have these investor visas.

    Is not the correct way to sell these visas is to pay a huge fee to government for gain revenue on top on any investment?

    a number of migrants come from undemocratic countries where civic values are under-developed. The puzzle is why come to a country you despise? some build a new life. others bring bitterness.

    What were the two books?

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