Work and Holiday Visa, is it a pointless visa?

This bears repeating yet again:

Big A.D. said:
There are four factors to production:

Labour
Land
Capital, and
Entrepreneurship
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Note that "spending" does not feature in any of the four stages of the production of wealth. Spending happens after the production cycle has been completed, because spending is just the reward for our productive efforts. We need entrepreneurship (business people with foresight willing to risk their positions), capital (investors willing to risk their financial position), land (for the supply of resources) and labour (the physical and skill base required to bring goods to the market).

Tourism does not feature in any of those stages because tourism is a form of consumption and consumption destroys wealth. That doesn't mean that consumption is evil, far from it, consumption is the end goal of all production (we have an endless desire to meet our needs), it simply means that consumption will not help us to meet our needs unless we enhance production firstly. Say's law.

So we need to encourage entrepreneurs by creating an environment that rewards risk, we need to protect capital and stop destroying the savings of individuals through inflation, we need to protect property rights in order to maximise efficient resource extraction and land utilisation and we need to maximise labour opportunities by dismantling barriers that restrict worker's and employer's access to labour markets.

Protectionism (which is what Bargain Hunter is arguing in favour of) will not enhance prosperity.
 
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mmm...shiney! You are misrepresenting my position. I am not in favour of protectionism per se. I never said we should have minimum wages or put import tariffs or anything like that. I am just pointing out that we can only allow a limited number of people (in terms of longer term visas) into Australia at once without becoming overcrowded. Given that is the case we should only allow in the people that bring maximum economic benefit to the country.

I would argue a backpacker working at a cafe or a "skilled" migrant who comes and gets a job in IT or accounting are not the people that bring maximum benefit to Australia. If you want to let in say 200,000 people a year into the country and there are millions of people who want to come we should be pickier and have far more logical selection criteria.

Also you have to remember that we don't live in a free market, and every time a foreigner comes in to Australia and works here, that is one more local who could have had that job who ends up sitting at home collecting centre-link for which taxpayers have to foot the bill.

To say that tourism is a form of consumption that destroys wealth is misrepresenting the situation. If a tourist comes from China to Australia and spends $10,000 in Australia, then China is $10,000 worse off, I agree with that. But how could you possibly argue that Australia is worse off? Why are we somehow magically worse off when $10,000 got injected into our economy? That is serious mental gymnastics. Its our gain and China's loss. $10,000 of savings in China got consumed. Wealth in China got destroyed. No savings in Australia got consumed. Increasing the amount of tourists coming to Australia obviously boosts jobs in tourism and hospitality and boosts company profits in those sectors. If a Chinese person wants to go on holidays and spend money would you rather he spent it in Thailand or Australia?

If somebody who lives in Sydney decides to take $10,000 of his savings and goes to Queensland for a holiday and spends that money I agree with you that the $10,000 of savings in Australia got destroyed. However like I pointed out if somebody from overseas brings their money and spends it in Australia that is a different story.
 
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Bargain Hunter said:
I would argue a backpacker working at a cafe or a "skilled" migrant who comes and gets a job in IT or accounting are not the people that bring maximum benefit to Australia. If you want to let in say 200,000 people a year into the country and there are millions of people who want to come we should be pickier and have far more logical selection criteria.
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In a zero sum world, I would agree with you Bargain Hunter, we should only let people with $10million plus to invest in Australia and of retirement age to come to Australia.

However, this still creates a problem of who will work to clean the dishes and sweep the floors.

If you break down the reasons why people dont work would you say 50% fall in these categories with the common denominators being.

Too far away
Too Hard
Start to early
Finish to late
Hours are bad
Hours are too long
Too Dirty
Doesn't pay enough
Want something else - Looking for a "xyz" job
It is beneath me
Boss is a prick
Other employees are pricks
Have to look after the kids

How can they refuse these jobs if they are not living homeless in the streets
Dole -> rental allowance etc etc
Living off savings
Living off parents/relatives/friends


Another personal example, my niece has has been on and off new start or something, she graduated from Sydney Uni two years ago.

She is an unemployed 25year old
Living at home
Her parents supplement her income
I have offered her a job, but it is too beneath her, she is looking for a creative job that suits her.

Bargain Hunter said:
If somebody who lives in Sydney decides to take $10,000 of his savings and goes to Queensland for a holiday and spends that money I agree with you that the $10,000 of savings in Australia got destroyed. However like I pointed out if somebody from overseas brings their money and spends it in Australia that is a different story.
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Dont agree with either of you... (in your reply to MM)
In a local holiday it is zero sum within Australian context, ie the wealth was transferred from one Australian to another Australian.
With a Chinese national Australian wealth has increased, ie it came in from a Chinese national to local Australian.
 
IP, wealth is not money, it is created by the mutual exchange of value. In both examples, wealth is enhanced. The holidayer exchanges something of less value for something of greater value ie $$ for a motel room or a tent site, whilst the provider exchanges something he has of less value for something of greater value ie an empty hotel room or vacant tent site for $$$.

Prosperity is enhanced when two or more individuals engage in voluntary, mutual exchange, trading things of lesser value for greater.

This is the basis of the free-market economy.
 
mmm...shiney! The problem is again we don't live in a free market.

In Australia there are too many purposefully government imposed hurdles to increasing the supply of housing (high taxes, costly and time consuming council approval, zoning requirements, corruption, etc). Until these issues are resolved (which they likely will not be due to vested interests) then we need to have some restrictions in place on foreigners purchasing property in Australia. Because the supply side response to the increased demand would be somewhat stunted due to afore-mentioned hurdles.

In an ideal free market world increased demand for property from foreigners would result in more houses and apartments being built to meet that demand. However we live in the real world where that does not happen to the extent it should and increased demand by foreigners for property simply helps push property prices up to un-affordable levels.

I am trying to talk about scenarios which could actually be politically feasible to implement (by looking what other countries are doing) rather than utopia scenarios you talk about.
 
Your reference to Utopia is fallacious.

Your solution to the threats posed to our economic freedoms involve more restrictions.
 
Mmm....Shiney! sometimes an evil which cannot be undone (not politically feasible) necessitates another lesser evil to counter it. We just have to agree to disagree.
 
Bargain Hunter said:
In Australia there are too many purposefully government imposed hurdles to increasing the supply of housing (high taxes, costly and time consuming council approval, zoning requirements, corruption, etc). Until these issues are resolved (which they likely will not be due to vested interests) then we need to have some restrictions in place on foreigners purchasing property in Australia. Because the supply side response to the increased demand would be somewhat stunted due to afore-mentioned hurdles.
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So we're back to cracking down on foreigners because we can't get our own shit together.

Foreign tourism makes up 0.8% of our GDP. Even if we tripled it with more accommodating visas, we'd still have 97.6% of the economy to figure out for ourselves.
 
Big A.D. as I pointed out before I am not only talking about tourism, I am talking about the whole migration/visa system of which tourism is one part.

On top of boosting tourism, if we made it easier and more attractive for wealthy foreigners to come and live and invest here and for example we managed to get an extra 50,000 millionaires per year to become permanent residents and invest an average of $2 million each into the Australian economy (into productive investments), that is an extra $100 billion a year of investment into the Australian economy. That is additional investment every year equal to 5.6% of GDP on top of the tourism boost you mentioned previously. That would be a huge boost to the Australian economy. Imagine the cumulative compounded effect of such additional investment over a ten or twenty year period, it would put growth into overdrive.

Mmm... Shiny! I don't like being called a collectivist, I just like to live in the real world (as opposed to a free market Utopia which you will never live to see) and look at solutions that are actually politically possible to be implemented.

Let me ask you a question, in most countries including Australia there is an unwritten, implicit assumption that if there is a severe banking crisis that the government will bail out the banks (or at least the depositors and senior bondholders). Now you and I will both agree that it's irresponsible, immoral, introduces moral hazards and distortions of all manner. Ideally banks would be allowed to fail rather than get bailed out by the government.

Do you also agree that realistically this system of bailing out troubled banks is not going to change in our lifetimes due to the nature of the political situation and the powerful vested interests?

If you agree that the status quo will remain the same in regards to bank bailouts, then do you also agree that banks should be regulated by the government in regards to what risks they can take,capital adequacy, etc? Because the taxpayer is underwriting the risks (yes we both agree its wrong but that is the way it is) therefore isn't it logical that the government/taxpayers regulate and restrict what banks can do to limit the severity of any future banking crises and thus limit the amount of bailout that will be required from them?

Can you see the frame of mind I am taking in regards to discussing issues? I just think we have to be realistic.
 
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Bargain Hunter said:
Big A.D. as I pointed out before I am not only talking about tourism, I am talking about the whole migration/visa system of which tourism is one part.

On top of boosting tourism, if we made it easier and more attractive for wealthy foreigners to come and live and invest here and for example we managed to get an extra 50,000 millionaires per year to become permanent residents and invest an average of $2 million each into the Australian economy (into productive investments), that is an extra $100 billion a year of investment into the Australian economy. That is additional investment every year equal to 5.6% of GDP on top of the tourism boost you mentioned previously. That would be a huge boost to the Australian economy. Imagine the cumulative compounded effect of such additional investment over a ten or twenty year period, it would put growth into overdrive.
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Yes, and as I pointed out before, being rich is not the same as being a creator of jobs.

Simply letting a lot of rich people migrate here means either:
a) We enact some kind of economic apartheid so they can/can't/must/won't spend their money on certain things, which is inherently unfair and creates double-standards, or
b) We treat them the same as everyone else here, which means they'll spend their money on the same things everyone else here spends it on: flipping existing housing back and forth between each other for increasing sums of money.

50,000 millionaires would be 0.2% of the Australian population, so they arrive here and...they're stuck with the same economy the rest of us are trying to deal with.

If you want to make people invest in productive enterprise, start with the 99.7% who are here already. We have money here, we just choose to spend it on stupid things.
 
@ BH, your repeated reference to a Utopia is fallacious. Your "realistic" policies will not enhance economic freedom, they merely re-arrange the deck chairs on the Titanic.

We need to remove restrictions rather than replace or introduce more. In the absence of sound policy, the next best is no policy, so remember..........

17626361_1383886148321733_6138969581709110169_n.jpg
 
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Big A.D. said:
a) We enact some kind of economic apartheid so they can/can't/must/won't spend their money on certain things, which is inherently unfair and creates double-standards, or
b) We treat them the same as everyone else here,
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Big A.D. we already treat people in Australia differently depending on what types of visa they have. People with student visas cannot legally work more than 20 hours a week and do not get access to medicare or centrelink. They could be studying here for 3+ years while not getting access to centrelink or medicare.

For work and holiday visas which can go up to 2 years they also do not get centre-link or medicare. Furthermore the work and holiday visa is for 12 months and if they want to get it extended they must work for 3 months on a farm to get the 12 month extension. Also even those with permanent residency cannot vote in federal elections only those with an Australian citizenship can do so.

So we already treat foreigners differently (and tell them what they can and cannot do) than locals if they do not have an Australian citizenship.

In Australia currently we only give people a quick, easy, hassle free business/investment visa if they invest $5 million dollars plus into Australia.

Currently the guys investing 1 or 2 million can get a visa but they still have to jump through a lot of hoops.

My point is why can't we have a visa where for example foreigners that invest anything over $1 million dollars into approved investments (i.e. basically any productive investment that is not buying/flipping existing assets) get a 5 year residency (we process the visa within a guaranteed 3 month window and make it very easy to apply), but in that 5 years they do not have working rights (they are here to invest/do business not to work as an employee) and do not have access to medicare or centre-link, and at the end of the 5 years they get granted automatic citizenship (subject to no criminal convictions). Once they have citizenship they can do whatever they want like everybody else.

We are not forcing people to do anything, and its not economic apartheid, or collectivism, we are simply offering them a hassle free path to citizenship (i.e. reward/carrot) by investing in our economy and if they don't like it then they can apply for a different type of visa or choose a different country to migrate to.

And yes they will be job creators because as I mentioned before it must be "approved/eligible investments" to get the visa. And part of the visa conditions (so they do not push up existing house prices) could be that in the first 5 years (i.e. before they get granted citizenship) they can only purchase a house or apartment that is off the plan or under construction, or buy land and then build on it, etc. (or they can just rent for the first 5 years).

Ipv6 in regards to your point about if we don't have Indian and Chinese students and backpackers who is going to wash dishes and clean toilets, etc? Well the answer is that there are plenty of reliable locals who will do these crappy jobs if you increase the pay rate, job security and working conditions. I am sure plenty of reliable locals would take a dish-washing or cleaning job that is permanent and pays $25 per hour plus super, penalty rates, paid vacation, overtime, etc.

We bring in backpackers and Indian and Chinese people to compete down the wages of the waiter earning $19 per hour or the graduate accountant earning $50,000 per year, meanwhile we have waiting lists and extortionate prices for specialist doctors and tradespeople because due to the powerful industry lobbies its very hard for foreigners to get visas and then licensing in Australia to work in those types of professions.

So some dermatologist that that migrated from Slovakia ends up only working as a G.P. in Australia because he could not meet the licensing requirements to be a dermatologist (even though he was practicing as a dermatologist successfully for years in his country) and so we have to pay $100 for a 15 minute visit and wait 2 weeks to to see the dermatologist due to an artificial shortage of them.

Australia thinks its a good idea to crush the wages of peasants at the bottom of the pyramid by making them compete with foreigners but we got to protect our high income earners from foreign competition because the plumbers and the plastic surgeons really need their Mercedes and Double Bay mansions!!
 
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P.S. yes Big A.D. I agree in Australia we currently have a lot of government created distortions in our economy which result in Mal-investment but that is a completely separate issue (and very hard to fix due to vested interests) to the issue I am talking about and is basically a whole other can of worms.
 
Bargain Hunter said:
Ipv6 in regards to your point about if we don't have Indian and Chinese students and backpackers who is going to wash dishes and clean toilets, etc? Well the answer is that there are plenty of reliable locals who will do these crappy jobs if you increase the pay rate, job security and working conditions. I am sure plenty of reliable locals would take a dish-washing or cleaning job that is permanent and pays $25 per hour plus super, penalty rates, paid vacation, overtime, etc.

We bring in backpackers and Indian and Chinese people to compete down the wages of the waiter earning $19 per hour or the graduate accountant earning $50,000 per year, meanwhile we have waiting lists and extortionate prices for specialist doctors and tradespeople because due to the powerful industry lobbies its very hard for foreigners to get visas and then licensing in Australia to work in those types of professions.
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What you don't get is that business owners don't want to pay someone $25/hr plus, super, plus penalty rates, plus annual leave to wash dishes on a permanent basis. Because, as I have said, at that price for labour an employer gets no net benefit for the expense incurred. How much return do you think an employer will get from a dish pig that costs him $900/week? That's $900 wasted every week that could be used on something else - like hookers, blow and the ponies. Employers want flexibility about who they can employ, at the rate at which they pay and when they need to employ them. A job is not a right - it is one factor in the production process.

So Australians looking for permanent jobs at $25/hr will continue to remain unemployed until wages reflect the true value that a worker can add, and customers will continue to wait upwards of 45 min in my cafe for a takeaway on a busy night and will have to content themselves with being served by 15 yo girls because we can't afford to put on more staff and the customers don't want to pay the costs of more experienced, full time staff by paying more for their food if we do change our employment strategy.

You're under the misapprehension that business owners can pay less than the current award rate for foreign workers. If they are doing it they're doing it illegally and the same strategy can apply to domestic workers as well. You're misguided BH, it's not foreign workers that threaten the ability of the unskilled or low-skilled workers from getting a job, it's the ridiculously high wages that we have to pay workers that keeps them unemployed. So we choose to staff our business sparsely and the unemployment rate remains high.
 
Bargain Hunter said:
P.S. yes Big A.D. I agree in Australia we currently have a lot of government created distortions in our economy which result in Mal-investment but that is a completely separate issue (and very hard to fix due to vested interests) to the issue I am talking about and is basically a whole other can of worms.
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No, the two issues are intrinsically linked.

Take a look at what you have to do to raise capital in Australia: http://asic.gov.au/regulatory-resources/fundraising/raising-funds-in-australia/
This assumes you're not just going to the bank and taking out a loan against your house because, for example, you didn't buy one 10 years ago and have limited equity - you're trying to start an enterprise from (close to) scratch or you've already started something, it hasn't gone bust and you're trying to take it to the next level.

Now, there's some reasonable requirements in there that offer some protections to your potential investors. There's also some requirements that explicitly restrict how successful you can be by capping the amount of money you can raise and mandate some very onerous (and expensive) legal documentation.

We've only recently (in the last few years) unf**ked the tax treatment on employee options schemes.

We've just (in the last few months) legalized crowdfunding, but it's still nowhere near as easy to do as it is in the UK, nor does it offer the same level of tax incentives for the companies or the investors as they have there either e.g. https://www.crowdcube.com/pg/eis-seis-tax-relief-overview-43

Compare that to the tax treatment of real estate here: no CGT on the primary residence, half price CGT if you wait 12 months before flipping an investment property and fully tax deductible holding costs in the shocking event where you actually have to reach into your pocket while you wait for your speculation to pay off.

If we don't fix the current issues that cause mal-investment, importing rich people is only going to pump more money into existing mal-investments and inflate any bubbles that may be lurking.

Want people to buy government bonds? Stop green-lighting billion dollar road projects that Infrastructure Australia says have less than a 0 cost-benefit ratio. If it's officially a "dud investment", it doesn't matter whether it's locals or foreigners funding it.

Again, if you want capital to flow freely, you have to let labour flow as freely as well. How freely those things come and go is a matter of how protectionist or laissez faire you want to be, but they have be in proportion to one another otherwise things get out of whack and, generally, it works better leaning towards the freer side of things.
 
mmm....shiney! said:
You're under the misapprehension that business owners can pay less than the current award rate for foreign workers. If they are doing it they're doing it illegally and the same strategy can apply to domestic workers as well.
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Mmmm...shiney! Yes many small businesses illegally pay backpackers in cash (we all know a large percentage of small businesses do not fully declare there cash income and hence spend it as cash off the books) and underpay them relative to award wages. The practice is rampant and I have seen it often enough with my own eyes and heard about it often enough from backpackers and foreign students. Its very difficult to control such practices. It does not happen anywhere near as often with local workers because a lot of locals do not want to work for such little pay because they either have centre link or their family, etc supporting them. Also the farm work visa extension for backpackers means that they will work for peanuts just to get the visa extended because its about the visa extension not the money, so most backpackers working on farms end up getting illegally underpaid while the government turns a blind eye because the government wants farmers to stay in business for political reasons.

Especially now with the "backpacker tax" backpackers are even more likely to work for cash in hand because the "backpacker tax" means that backpackers do not have a tax free threshold and have to pay tax on every dollar they earn, which means that cash has become relatively more attractive for them then previously. Also in Australia for foreign students the fact that they can only legally work 20 hours a week is something that motivates them to work for "cash in hand" because they can work more hours.

Big A.D. some other countries have investment visa programs in which they specify what investments are permitted/eligible (to obtain the investment visa) hence this helps to minimize the distortions. I already addressed this point and you glossed over it. I already pointed out that you cannot let it be a foreign investment free for all. If they want they investment visa they have to play ball. That being yes I agree with you that reform is needed in Australia.

In regards to your points on property related distortions firstly for primary place of residence being capital gains tax free that is because you could plausibly argue its not 100% an investment and its partially a durable consumer good (shelter). If you buy an old/collectible car and drive it for personal use and then lets say two years later you sell it for a profit do you have to pay capital gains tax on that?

The primary purpose of a owner occupied home purchase is usually to have a place to live with any capital gains made generally being a fringe benefit. Besides for most people if you sell your owner occupied house you have to live somewhere so you are probably going to buy another house to live in which has likely also gone up in price. The second point to note is that the lack of capital gains tax is somewhat offset by the fact that you do not get to claim interest costs on a loan for an owner occupied property like you would get to claim interest costs on investment property, geared shares or small business with bank loans.

The fact that if you run a business from home and claim expenses for your business e.g. phone, internet, water, electricity, etc from your home bills that it potentially renders you liable for some capital gains tax in the future when you sell your primary place of residence gives you a clue that the government does not consider a place of residence to be an investment/business, hence no CGT. Its like if you have a car that is for personal use you cannot claim expenses for the car and if its for business use you can and if its for mixed use then you have to apportion it. Same for laptops, mobile phones, etc If you buy a car for personal use and you get a good deal and buy it cheap and then happen to sell it for a profit after using the car for a while, no tax is payable, because you are not in the "business of" flipping cars and the profit was merely incidental. The same concept applies for a primary place of residence. Note that vacation homes get treated differently to primary place of residence because they generate income.

Furthermore property whether owner occupied or investment (leaving aside certain first home owner concessions) has stamp duty on the purchase price as well as annual land tax. This needs to be considered given that many other assets such as shares and precious metals, etc neither have an annual equivalent to land tax nor an equivalent to stamp duty. I have not even mentioned council rates or water rates (yes they are providing a service but its a forced government owned monopoly service).

Furthermore negative gearing is not only available for property even though property is the most commonly negatively geared asset. You can negatively gear shares, or managed funds, or a small business (depending on which legal structure you use), or a farm, or pretty much most income producing assets and offset the loss against your personal income. In regards to capital gains tax discount for holding a property for more than 12 months if you hold shares or a small business or precious metals, etc for more than 12 months before selling the same discounted tax rules apply.

mmm...shiney! and Big A.D. you are both intelligent and I respect your view points however you are both cherry picking from my arguments while like leaving other crucial arguments unchallenged, and thus distorting what I am trying to say. You both gloss over far too much.

I think I am done with the debate on this particular thread, it has gone on for long enough and I do not wish to continue it any longer. I think we agree I am not going to change your minds and you are not going to change mine. If you reply to any of my arguments I will not reply. Like I said I am no longer looking to continue this debate.
 
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p.s. I will add one comment which I forgot to mention
mmm....shiney! said:
A job is not a right - it is one factor in the production process.
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That is a straw man argument which you seem to make a lot of. I never said a job is a right. I never said we should have a minimum wage (I merely suggested that voluntarily paying higher wages can get you reliable local employees).

However what is a right as a nation is the right to decide who we let into our country (I bet you wouldn't like it if 20 million Indians and 20 million Chinese turned up next week because we just let everyone in) with my point being there are more productive people we should be letting into our country than the backpackers washing dishes or serving your latte.

I'm done now. Thanks for the debate guys.
 
Interesting thread here. Like shiney, I'm in hospitality. I employ student visa staff (South Americans). I pay them $25.10 an hour plus super plus Workcover. They are good workers and are ultra reliable unlike many "locals" I have had work for me.
Not every cafe owner pays under award.
 
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