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The “Pacific Solution”
A cost blow-out whichever way the tide turns
1.
Executive Summary
This paper forecasts the costs of the Pacific Solution
by building a model of the average cost per day per detainee. It concludes that the daily costs
of the Pacific Solution are higher than the costs of detention in
Australia. The costs range
from $200 to $400 per day per detainee, compared to $120 in Australia and
$67 if the refugees are released into the community. This contradicts the Government’s
statement on this[i].
The model forecasts that, if asylum seeker arrivals
continue at about 4,000 per annum,
the numbers detained on the islands will rise from the current
level of 1,676[ii]
people to a permanent population of over 4,000 refugees within five years.
This will require significant additional infrastructure and likely
extension of the program to other countries. A second issue of concern is the length of time people
will spend on the islands – the model predicts that within five years,
there will be 1,300 people on the islands who have been held there for over
two years. The implications of
such lengths of detention are now being felt in Australia. The tragedies of recent months
could be exported to Pacific islands.
2.
Background
In a previous paper I have analysed the cost of
Australia’s internal detention policy[iii]. That paper concluded that the
average cost of housing an asylum seeker in detention in Australia was $117
per person per day. This has
since been confirmed by DIMA who have stated that the cost per day is $120.[iv]
Since then the Government has moved to a new approach
to asylum seekers called the “Pacific Solution”. Under this scheme asylum seekers are flown to Nauru or
to Papua New Guinea (Manus Island, a remote island near the equator).
I wanted to analyse the costs of the Pacific Solution
to the tax payer, as well as to predict how “big” the island detention
centres would become. To
do this, I constructed a “multi-decrement model” showing the build-up of
numbers of detainees under the Pacific Solution. The model forecasts both the number of asylum seekers
being detained, the length of time of each detention and the average cost
per day of detention at any point of time. A multi decrement model is a common actuarial
forecasting system used to model populations of lives over different
durations.
As expected, the model is sensitive to three
assumptions:
The amount of money spent on the Pacific Solution,
either directly through constructing the detention camps, or indirectly
through Government payouts.
The number of people attempting to seek asylum in
Australia, and therefore placed in a detention camp on an island. These are called “ new entrants” in
the model.
The rate at which claims are processed and people are
moved off the islands to either their country of destination or returned
home. This is called the
“release rate”
Each of these are discussed below in Sections 3,4 and
5 of this report. Section 6
shows base results and Section 7 shows a variety of scenarios on the base
forecast.
3.
The amount invested in the Pacific Solution
Reports on the cost of the Pacific Solution vary
wildly. In September 2001 the
Treasurer, Peter Costello, said the cost would be $103 million[v]. In January 2002, a leaked Cabinet
paper said that the government had already spent $285 million on the
Pacific Solution and was budgeting a further $200 million for the next five years (ie $1,285 million in
total). Mr Ruddock refused to
deny these figures, but went on to say that the cost of detaining these
people in Australia could have been over $300 million[vi].
The Australian Financial Review then ran an article
quoting Government sources as saying that the Department of Immigration
(DIMA) and the Department of Defence were seeking additional funding of
$1.8 billion to fund “the Coalition's policies on security and asylum
seekers”[vii]. Only part of this is for asylum
seekers but it gives a sense of the magnitude of the numbers.
These numbers may seem incredible to those aware that
we are dealing with only 1,676 asylum seekers to date. A detailed breakdown of the $285
million spent to date is not available, but costs in the public domain have
included:
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Initial cost components of the Pacific
Solution[viii]
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$m
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Nauru facility cost
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72
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Nauru additional aid
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30
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Manus Island facility cost
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24
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PNG additional aid package
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20
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MV Tampa military costs
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20
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Christmas Island and Coco Island costs
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8
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Cost components known to date
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174
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This paper uses the leaked Cabinet
number of $285 million as the spend to date, given that a large number of
known costs (flying the asylum seekers to the islands, military efforts
subsequent to the Tampa) are not included in the table above. There are
also significant investments in the islands’ infrastructure as the
following quotes show. “Nauru's infrastructure problems should soon be a
thing of the past”[ix]
and “The development of the detention centre for 446 on Manus Island had
brought many benefits to local business and an upgrade to water, power and
sewerage works for the island's naval base”.[x] It is easy to see how the $285
million could be reached.
But what of the spend going
forward? The asylum seekers
will be subject to the same expensive prison style regime that costs $120
per day in Australia. In the
absence of other information, we have used the leaked government figure of
$200 million per annum as the cost if the inflows stay at 4,000 per
annum. If the inflows reduce,
we have assumed a pro rata reduction in the annual costs, down to a fixed
annual spend of $4 million while some detainees remain .
4. The number of new entrants to the camps
The numbers housed on the islands at 31 December
2001and 5 February 2002, and the current capacity of the camps, is as
follows:
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Current numbers in detention
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31 December 2001
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Latest Estimate 7 Feb 2002
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Current Capacity
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Nauru
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1,118
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1,149
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1,200
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Manus Island - PNG
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216
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360
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446
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Christmas Island
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211
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34
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200 est
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Cocos Island
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131
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131
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200 est
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Total
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1,676
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1,676
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2,046
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After up to nearly 6 months in the camps, none of the
detainees had been released (24 August 2001 to 7 February 2002, the date of
this paper).
How many asylum seekers can we expect will be brought
the islands? The
following table shows the number of refugees attempting to seek asylum in
Australia via a boat. These
numbers have been constructed from monthly table of boat arrivals on the
DIMA website[xi].
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Number of asylum seekers (by boat)
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June 1998 to June 1999
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1,000
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June 1999 to June 2000
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4,174
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June 2000 to June 2001
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4,163
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July 2001 to Feb 2002
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3,208
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As is known, the number of refugees seeking asylum has
increased over the past two years to about 4,000 per annum. However the number is not “leaping
upwards”, month by month, as the Government claims. Instead, the number of people
arriving each month fluctuates wildly. The table below shows numbers of
asylum seekers by month for the past 36 months.
Numbers are jumping around. They fall as well as rise. The peak in November 1999 was higher than any subsequent
peak. Numbers fell to zero in
July 2001.
For the purposes of the model, I have used 4,000
people as the base number of annual new entrants to the camps. I have then run three scenarios:
The number of asylum seekers falls to zero (I have
called this Scenario Howard)
The number of asylum seekers halves (I have called
this Scenario Peace Time)
The numbers of asylum seekers rises by 10% per annum
compound (I have called this Scenario War Time).
5.
Rate of release from detention
This is the real driver of the populations in the
camps. The rate of
processing (both the initial assessment and the resolution of appeals) is
difficult to get hard facts on.
DIMA have stated that 80% of all refugees are processed within the
first 18 weeks[xii]. This appears to be
contradicted by:
The time taken to process the current people on the
Pacific Islands – as of February 7 2002, all detainees were still on the
islands, being up to 6 months from their date of detention (MV Tampa came
on August 24). The majority of
detainees have now been detained for over three months.
The current make-up of the population of
detainees. As at December 2000
58% of the detainees in camps had been there more than 3 months[xiii]. Given the flow rate of refugees
around that period, this is inconsistent with the processing rates DIMA is
quoting.
After studying the various DIMA and other materials
available, I have constructed a base release rate from the centres as shown
below. Note that this release
rate includes both initial processing and time for a decision following
appeal:
Under my model, 70% of detainees are released within 6
months. This is considerably
better than DIMA is managing at the moment with the Pacific Solution, but
presumably reflects DIMA’s aspirations better. A key feature of the release statistics available is
that the release rate slows significantly after the first six months. This is due to the cases left
becoming progressively more difficult to process and to the appeals process
being much slower than the original assessment process. Once detainees have been inside
more than two years, their rate of release slows so much that they are very
likely to end up detained for up to five years.
Having derived opening numbers (1,676), new entrants
(4,000 per annum) and release rates (as shown above), we can now forecast
the numbers detained under the Pacific Solution as follows:
After five years, the numbers detained has increased
to over 4,000. As shown in
Section 2, the camps currently only hold 2,046. This kind of scenario has
presumably been factored into the Government’s forecast expenditure. But of possibly even more
importance is the number of people who have been detained for over two
years. By 2007, the model
predicts 1,300 people in detention for over two years. This means that the psychological
and mental problems currently evident in Australia will become a problem
for the Pacific Solution.
Other papers have dealt with these issues.
6.
Forecasts of daily costs per detainee under base scenario
The Government has not invested $285 million just to
house 1,676 people for a few months. It has invested this money as a long
term “solution” to the asylum seeker arrivals. But how does this investment compare to housing the
detainees in Australia?
By dividing the cumulative amount spent by the
Government on the Pacific Solution by the cumulative number of detainee
days, we get an average “cost per detainee per day”. On day one, the cost is high
because a large investment has been made ($285 million) for a small number
of detainee days (1,676 people for 3 to 6 months). But over time the daily cost falls,
as the capital expenditure is spread over more detainees and more days.
The base case daily cost is shown below:
What does this tell us? It tells us that, even after five years and with 4,000
asylum seekers arriving per year, the Pacific Solution costs over $200 per
person per day. This high cost
is because of the high up front cost (the $285 million that did not need to
be spent) and the high ongoing costs (some $200 million per annum). The local detention, while sending
profits back to the US private prison company Wackenhut[xiv],
would at least have provided some economic flow on and a daily cost of
$120. In either case,
detention is much more expensive than release into the Australian community
– a daily cost of $67.
7.
Forecast Scenarios
The figures above are based on a central estimate, but
it is important to test them with some “what if” scenarios. I have tested the model under
three such scenarios:
The number of asylum seekers falls to zero (I have
called this Scenario Howard).
Under this option, the annual costs of $200 million fall to $4
million. The camps are
maintained at current levels, additional aid stops and the remaining
detainees are fed.
The number of asylum seekers halves (I have called
this Scenario Peace Time).
Under this option, I have assumed that the annual costs are also
halved to $100 million.
The numbers of asylum seekers rises by 10% per annum
compound (I have called this Scenario War Time). Under this option, the annual cost also rises by 10%.
The graph below shows the cumulative costs. Interestingly, the worst financial
outcome is Scenario Howard.
This is because the initial investment of $285 million has been
spent on only 1,676 people for a some months. This is a financial disaster compared to having
continued detention in Australia.
The Howard Scenario has led to a Pacific Solution cost
of over $400 per detainee per day.
All other scenarios lead to a cost of $200 plus per day.
Naomi Edwards
BSc (Hons) FIA FNZSA FIAA
Notes and sources:
Below..
Below…
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