RMIT public policy professor David Hayward has analysed unemployment and immigration data over the pandemic and estimates that Victoria’s unemployment rate would have exceeded 7% if regular immigration flows had continued. Professor Hayward also believes that the pre-COVID mass immigration policy was a key driver of the nation’s decade of anaemic wage growth:
The closed international borders and the reversal of interstate migration have kept nearly 170,000 potential employees out of Victoria’s labour force…
Professor Hayward says the missing migrants would probably have pushed that figure up to 7 per cent, or even above 8.5 per cent in what would be a nightmare scenario for policymakers.
Employers may have become too reliant on overseas migration to fill lower-paid jobs in the economy, helping to stifle wage growth, he told The Sunday Age.
“Maybe the high level of skilled migration … [had the] effect of keeping wage growth below inflation for a very long period of time,” he said.
“I think it’s a really good time to be just reflecting on … the right level of migration that we need.”
The Reserve Bank of Australia (RBA) has stated repeatedly that it is committed to driving unemployment below 4.5% because lower unemployment is a pre-requisite for driving wage growth above its current historically low level.
The RBA has also acknowledged that the closure of Australia’s international border and the loss of around 500,000 migrants is a key reason why Australia’s unemployment rate has fallen to its current decade low of 4.9%, which is still well above the RBA’s target level.
Achieving the RBA’s goals explicitly requires Australia’s immigration intake not to return to pre-COVID levels. Importing 180,000-plus migrant workers into Australia every year, as was was the case pre-pandemic, would necessarily drive up labour supply and unemployment, lower worker bargaining power, and place downward pressure on Australian wages – as was the empirical evidence over the prior decade.
