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”,


9 thoughts on “The economics behind the asylum seeker policy”

  1. Well argued and written Alice. Awesome. I couldn’t agree more, especially with your last paragraph. Aiding those who seek asylum is a humanitarian issue not an economic issue. Period. Talk of “queues”, “business models” and “illegals” is abhorrent. It’s our obligation as global citizens to let those in need seek our protection. Cheers Dave

  2. Great article!

    Though I’ve got a couple of bees in my bonnet pertaining to this issue though.

    I’ve been thinking whether it could be viable for detention centres to be partly or even fully privatised. It would save costs, and probably be administratively more efficient? It would be interesting to know what your views are on this.

    Also, how about making asylum seekers who are found to be genuine pay for the costs of their detention? Once they are out in the community as productive citizens, perhaps they could repay the costs of their initial detention. The biggest problem I could think with this proposal was that people who are returned back to where they came from would not end up repaying the costs of their temporary stay…But there are all those statistics going around about how the overwhelming majority of asylum seekers are in fact genuine, so this problem is nullified to an extent.
    Again, it would be interesting to hear your thoughts on this.


    • Sorry Elijah, “asylum seekers who are found to be genuine pay for the costs of their detention”…you cannot be serious! Sounds like you have had a few BEERS, rather than a few bees in your bonnet mate. Dave

      • What’s wrong with making people pay for their accommodation costs when they arrive here in Australia and if they get accepted into the community as legal, productive citizens?
        They’ve entered illegally, and we’ve had to come up with some temporary accommodation for them until they are processed. The taxpayer shouldn’t bear the costs of people who enter illegally. Why should the taxpayer carry the costs for the accommodation of other people who’ve broken our laws, and when those who get accepted into the community can probably be able to pay off these accommodation costs anyway?
        If they’re genuine (and most of them are), they ought to repay for the costs of accommodation.
        Importantly, it could act as a deterrent against people to enter illegally into Australia, especially by boat.

        • Elijah, in my reply I used “accommodation” to describe the housing of asylum seekers, which of course it is not. Lets call it what it is: detention / imprisonment. Dave

          • Dave,
            I’m still not convinced that you’ve provided any real substantial counter argument to my proposition.
            I know you must feel very passionately about this issue, but you have misread what I’ve written if you think I’m trying to demonise asylum seekers; please do not think that I am, because I’m not.

            You’re completely right in saying that seeking asylum and refugee status isn’t illegal.
            But again you’ve misread me. I said that boat people enter without a visa do, in fact, enter illegally into Australia:

            Obviously those asylum seekers who’re granted entry into the community and get jobs etc. would pay off the costs associated with their detention over an extended period of time.

            I also think you’ve generalised refugees who are accepted into Australia as inept and incapable of earning a decent living. I think of them more highly, and believe that the overwhelming majority of them can productively contribute to Australia and integrate themselves into our society. After all, that is the very reason why they’ve come to Australia; to make a better life for themselves and to provide a better future for themselves and their children. I doubt many of those people who risk their lives on leaky boats who come to Australia would NOT have any sense of drive and ambition to better themselves.

            The problem with the Left in this whole debate is that they have used the sort of “moral” argument (which you employed) to counter the harsh policies of the major parties, and to try to demonise any proposals that dare to think outside the box. Unfortunately, this self-imposed “moral duty” to stand up for the weak and vulnerable so easily morphs into an ugly dogmatism, not doing anybody any good.


        • Im sorry Elijah, but after thinking better of it I decided I simply have to reply to your last “posting”. To restate what I wrote to imply those seeking asylum are “inept and incapable of earning a decent living” is simply untrue. I was stating the obvious: the last thing those who arrive here as asylums seekers need is to have the additional burden (beyond cultural and social isolation, language barriers and the fact that their qualifications and skills may not be recognised here) of a tax to pay for their incarceration. Davie is signing out

    • Hi Elijah, thanks for your comment!

      I’ve never actually thought about privatising detention centres so I can’t offer anything substantial about this. Intuitively, I am hesitant about it. While I can’t say our government is doing a good job at managing detention centres and while it would save taxpayer money, I’m skeptical of the sort of incentives that corporations might have in running detention centres and I think it can’t be good for such a humanitarian issue that is so sensitive to the public.

      Your second point sounds like a convenient conclusion to many practical problems surrounding asylum seekers, but once again it doesn’t address the deeper humanitarian issues at play. I will disregard economic refugees from my point at the moment and focus on genuine refugees. These are people fleeing persecution after all and it seems horrendous to make them pay for being detained in horrible conditions after being persecuted. I am unsure of numbers, but there has been a High Court case about a stateless asylum seeker being held indefinitely which the Court has ruled is a direct breach of Australia’s obligations under the International Covenant on Civil and Political Rights. To think that someone may be asked to pay for their detainment after being held indefinitely seems to be asking too much.

      The argument that taxpayers shouldn’t be paying people who undertake legal activities – entering a country without a visa – sounds compelling at first, but does not take into account that refugees are a different category of people, people to whom we owe certain obligations (at international law) once they enter Australian territory. This is why the Howard government was so adamant at preventing Tampa from entering Australian waters. Refugees are people we have an obligation to protect, they are different from other migrant or arrivals, and hence the argument that they are entering illegally for wont of a visa doesn’t seem to apply as appropriately to refugees as it would to others, and therefore is not reasons to make them pay for being detained.

      I think my main qualm is that while your ideas might be practical solutions in the short-run, it doesn’t solve the problem in the long term. I still think a regional solution would stem the number of boats coming to Australia in the long run, better than imposing financial sanctions on refugees. I think it’s important that we can’t justify our treatment of refugees simply by saying that they broke Australian law to come here, therefore a scheme like yours is allowable. I’ve heard many others laud very harsh and inhumane policies on the basis that refugees “break” our laws. In the end, I don’t think it’s very productive to maintain that refugees “break” domestic law, when they are an international issue. I feel like we are dealing with the problem on two separate planes, in that way, whatever solution we come up with will never deal with the root of the issue.

  3. Elijah. Seeking asylum from persecution is not illegal. Check your facts. Suggesting asylum seekers pay for their accommodation is outrageous on so many levels. Not the least being the morality of imposing costs on those who seek refuge and protection and who are extremely vulnerable and least equipt to meet those costs let alone feed themselves. Get a grip Elijah. Dave

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