The economics behind the asylum seeker policy

The economics behind the asylum seeker policy


This article is one of two Q&A specials informing the reader on a topic of economic importance to Australia that was discussed by the panel on the night.


On the 19th of July this year, Kevin Rudd introduced the PNG solution whereby any asylum seeker arriving by boat without a visa will be processed, and if found to be a legitimate refugee will be resettled in Papua New Guinea.

Policies of this kind have not been without precedent. The Howard Government introduced the Pacific Solution following the Tampa Affair – in which the government refused to allow a Norwegian freight boat carrying rescued asylum seekers from entering Australian waters – in order to remove asylum seekers to developing countries in the Pacific to determine their refugee status. Under Julia Gillard, the Malaysia solution was to transport asylum seekers to Malaysia for processing – later High Court decisions ruled that the declaration of Malaysia as a country for this purpose was not pursuant to the Migration Act 1958 (Cth) because Malaysia, amongst other things, was not a signatory to the Refugee Convention and therefore did not owe the same obligations to asylum seekers as Australia did. However Parliament duly amended the act after these decisions.

What distinguishes Kevin Rudd’s “hard-line” approach from these previous policies?

Firstly, while the previous policies allowed refugees a chance of being resettled in Australia, Rudd’s PNG solution permanently resettles genuine refugees in PNG; the catchcry of the Labor party’s election campaign being that no asylum seekers will ever settle in Australia. Secondly, unlike Malaysia, PNG is a signatory to the Refugee Convention. The PNG arrangement follows Parliament’s successful and preposterous decision earlier in May to excise the mainland from Australia’s own migration zone. This removes certain protections and obligations under the Migration Act that Australia immediately owed to asylum seekers upon them reaching the mainland. There are two qualifications however, one is that the policy is only directed at asylum seekers who are irregular maritime arrivals, i.e. boat arrivals, and second, while PNG is a signatory to the Refugee Convention it has made significant reservations.

After giving a brief overview of the background and history, I will now look at the economics at play behind and surrounding Rudd’s policy.

The Cost of Rudd’s Asylum Seeker Policy

According to the Department of Immigration and Citizenship, the estimated cost of running detention centres, made in February this year, is 2.124 billion dollars, a rise from recent years reflecting both the increase in numbers and the greater cost of administering detention centres in Nauru and PNG than mainland Australia. The sketchy estimate represents the cost of leasing the accommodation necessary to run detention centres, as well as staff costs, aircharters, interpreters and health services. This does not include capital expenditure – the cost of constructing new detention facilities. All up the Department says that over the next 4 years, setting up and running Nauru alone will cost 1.9 billion dollars.

Of course, one can identify associated opportunity costs as well. For example, it has been suggested that initial detention should be limited to one month to allow for preliminary health and security checks, after which interim visas can be granted to allow work or study and access Centrelink and Medicare benefits, but which limit residence to regional or rural towns. The savings produced by this alternative could free a couple of billion dollars a year (roughly costing $30,000 per person per year allowing for generous administrative overheads) which can otherwise be spent on public housing, hospitals, infrastructure and tertiary and secondary education. There are an estimated 96,000 unfilled fulltime agricultural jobs that asylum seekers can fill as populations of country towns slowly dwindle, and even if asylum seekers stayed on Centrelink benefits, they would still spend those benefits on rent, food and clothing to the benefit of the economy of the town where they live.

Economic Migrants or Genuine Refugees?

Foreign Minister Bob Carr recently made spurious claims that recent vessels contained 100% economic migrants. However Professor William Maley, Director of the Asia Pacific College of Diplomacy at the Australian National University claims it is “virtually impossible” for Senator Carr to know this, since the Immigration Department stopped processing applications for asylum from people on boat arrivals in August last year.

The government’s blanket rhetoric on economic migrants as distinct from, and somehow more reprehensible than genuine asylum seekers is neither productive nor informed. A person can flee a country for economic as well as religious, political or ethnic reasons. Being middle-class does not preclude you from seeking asylum. Secondly, the UNHCR Handbook on Procedures and Guidelines for Refugee Status Determination has noted that the distinction is “sometimes blurred” – “Behind economic measures affecting a person’s livelihood there may be racial, religious or political aims or intentions directed against a particular group…what appears at first sight to be primarily an economic motive for departure may in reality also involve a political element”.

Not understanding the “business model” and unintended consequences

The government proudly claims that it is cracking the “business model” of people smugglers. But in contradiction, a parliamentary research paper on this “business model” provides that “there is no authoritative definition of…’business model’…it is rarely explicitly defined.” This is amusingly backed by: “Managers interviewed on the topic for one study admitted they had never tried to define the term before or could not explain it clearly”.

Recent events suggest that people smugglers are well on their way to foiling Rudd’s PNG solution – by flying asylum seekers into Australia on fake tourist visas. Once they have landed and before they pass through border control, they are told to destroy their passports and claim asylum to the first official they met. The loophole in Rudd’s determined attempts to thwart people smugglers is that the PNG arrangement only applies to irregular maritime arrivals, which excludes entry by plane. Since the sums of money are so large, a third-party caled a “hawaladar” is brought in to hold the asylum seeker’s money on trust until smuggler gets the asylum seeker safely on Australian territory.

If the government’s aim is truly what the rhetoric makes out, then their vehement efforts to remove the products that people smugglers are selling, only seems to introduce a new “business model” which further harm the victims of people smugglers.
Anne McNevin, Lecturer in Politics and International Relations at Monash University, explains that the Government’s policy is focussed on deterrence – how to stop the boats – rather than why the boats are coming in the first place. People smugglers are selling the hope of resettlement, yet deterrence does not distinguish this hope but simply delays salvation and exacerbates suffering before protection is granted. Deterrence also undermines any regional solution for asylum processing and protection. If Australia outsources its international obligations to countries like PNG then there is no reason why developing Pacific states will commit to an equitable distribution of protection obligations for asylum seekers.
Rather, McNevin argues that the government needs to identify the true product people smugglers are selling and then break the market for that product.
What they are selling is real protection – a true chance to live somewhere free from persecution and to rebuild a dignified life. In the Pacific region, Australia and New Zealand are two of the few countries where real protection is possible. In order to break the “business model” the market in real protection needs to be closed down. The first radical solution is to remove protection obligations altogether. If Australia alone did this, then the probable result would be a redistribution of asylum seekers to the country that provides the next best protection. If all countries abandoned their obligations then there would be no real protection anywhere, and asylum seekers would be unable to escape persecution.
The second way is to make protection available for those who genuinely need it and hence remove the middle-man role of people smugglers. But it also requires political goodwill and cooperation between states. Real protection has non-excludable benefits. If one country offers it in the Pacific region, all the boats will arrive there and the other countries will benefit from that country taking all the responsibility and burdens, though in the long run it is also unsustainable. True commitment to stopping the boats means developing a long-term, united agreement to share the responsibilities of protection within the region, it does not mean a short-term solution focussed on deterrence.

Wider context

I have yet to scratch the surface of the complex interplay of issues making up the asylum seeker debate.

Should asylum seekers be politicised? Why is there such a popular conception that seeking asylum is illegal? Is there such thing as “jumping the queue”? How will the international community respond to Australia outsourcing its obligations? Has Australia breached international law? Will PNG afford adequate protection to asylum seekers? Is subjecting people to the possibility of mandatory detention in PNG humane? Is the separation of families to different islands humane? Are we comfortable with the way our government is treating certain people? Does this justify the need to protect our borders?

While I have given a brief overview of some of the economic forces at play in this issue, I stress that the issue of asylum seekers should never be examined exclusive of its humanitarian context. When we process asylum seekers in PNG or hold them in indefinite detention we are violating their fundamental human rights such as their right to liberty, freedom from arbitrary arrest and freedom from degrading or inhumane treatment – if not recognised by our own moral reckoning then at least prescribed in conventions such as the ICCPR. We need to consider these issues very deeply and ask ourselves whether we are comfortable with the conclusion that such breaches are justified for the “protection of our borders”.


Read more at:

[1] Julian Burnside, “Asylum Solutions: saving money with a more humane response”,


[1] Parliamentary Research Paper, “The people smugglers’ business model”,