POST 114: RESERVE BANK AUSTRALIA REVEALS HUGE TEMPORARY MIGRATION INTAKE IS CAUSING LOW WAGE GROWTH

Introduction

Before the Wuhan coronavirus arrived on Australia’s shore, temporary visas had reached a record number of 2.4 million migrants living and working in Australia’s cities and towns. See Chart 1 below

The level of temporary entrants has dropped to about 1.7 million as thousands of foreign migrants made their way back to their countries as the pandemic began to spread.

However, a significant amount, 1.7 million temporary migrants are still in Australia, competing with Australia’s unemployed and those that dropped out the labour force due to lockdowns.

There are new and significant findings from the Reserve Bank Australia showing the impacts that the big numbers of low skilled temporary visa holders is having on domestic wage growth.

Bank economists have revealed persistent spare capacity from temporary migrants in the labour market is a driving factor behind recent low wages growth. They point out that low wage’s growth has weighed heavily on Australian households.

What is astounding about Chart 2 below is that the significant dips in wage growth coincided with Australia reaching its highest ever net overseas migration intake of 315,000 migrants in 2008. This equated to 3.5 time more than the long-term overseas migration average of around 90,000.

(Source: Australia Department of Home Affairs, 2021)

Reserve Bank of Australia (RBA) governor Philip Lowe sparks a debate over immigration 

RBA governor Philip Lowe has argued that high immigration levels are partly to blame for years of low wage growth in Australia.

RBA’s economics research department have been doing research on the issue of high immigration and lower domestic wage growth. They found that people on student and holiday visas had contributed to low wage growth prior to the pandemic, as had the partners of people brought into Australia on skilled visas.

These migrants have partial or full work rights and tend to work in the lowest paid jobs, for which domestic labour is easily substitutable.

When will the Morrison government take notice of the mounting evidence and cut the migration program before opening the international border?

Federal politicians and bureaucrats continue to plot an excessive migration intake starting 2023.

The latest Federal government intergenerational report is pushing for a big increase in overseas migration from around 60% to 75% of population growth.

Federal Treasury are planning for net overseas migration to rise by 235,000 migrants by 2023-24.

But the real government immigration agenda is alarming.

For the Morrison government, it is the economy and gross domestic product (GDP) that takes centre stage.

The Treasury intergenerational report (2021) has proposed Australia needs to get to a NOM figure of 327,000 to claw back the economic decline from the Covid 19 pandemic.

Treasury’s very high immigration proposals do not include the fiscal impacts at the state and local government level.

Nor do they incorporate adverse environmental impacts, infrastructure and planning costs, or loss of suburban amenities as more families are crammed into higher density living.

Which begs the question is it time for the states to push for a decentralist immigration policy?

Enabling states, local government and the community to make an informed decision on how their cities and suburbs manage population growth?

Chart 2: Wage price index Australia

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