More proof immigration collapse behind Australia’s low unemployment

Over recent weeks, I have proven categorically (here and here) that the sharp fall in Australia’s unemployment and underemployment rates have been driven by the collapse in immigration over the pandemic:

The evidence is irrefutable and proven in the ABS’ labour force data.

Despite Australian jobs growth lagging the pre-COVID trend:

Australia’s unemployment rate has cratered to just 4.2% – the lowest reading since 2008 – while the employment-to-population ratio has hit its highest ever level:

Australia’s underemployment rate has also fallen to 6.6% – also its lowest reading since 2008:

The reason why unemployment and underemployment have cratered in the face of sluggish jobs growth, and the employment-to-population ratio has hit is highest ever level, is obvious: Australia’s labour supply went from growing strongly pre-pandemic to stagnating over the pandemic due to immigration turning negative:

Over the weekend, The ABC’s business reporter Gareth Hutchens also proved categorically that the collapse in immigration is behind the sharp fall in Australia’s unemployment and underemployment rates:

The closed borders have had a huge impact.

And they have been working in combination with our historically massive fiscal stimulus and loose monetary policy to drive the unemployment rate down to near-historic lows.

It’s not an either/or situation.

Here’s why…

Whenever we talk about the “unemployment rate”, we must engage with the labour force framework that produces the number.

There’s no way around it…

The labour force framework can be used to analyse what’s happening in the labour market at the moment because international borders are built into it, conceptually.

Embedded in the concept of the “working-age population” and how it’s linked to the “labour force” and how the labour force is needed to produce the “unemployment rate” is the very question of labour supply coming from overseas.

I’ve made a video that explains what I mean.

In the video, I’ll take you through the logic of the LF framework and show how the decision to close our international borders had a huge role to play in driving the unemployment rate down to near-historic lows.

Here is the video (I’ve made one or two verbal errors in the video so forgive me)…

Obviously, the historic size of the Australian government’s fiscal stimulus and the Reserve Bank’s ultra-loose monetary policy, which were used at the same time as the closed borders, had a massive impact on the economy and labour market too.

The economy could not have survived the pandemic without that stimulus. That stimulus has been incredibly important.

But the decision to close Australia’s international borders also had a massive impact on the labour market.

Nobody is denying that the massive stimulus deployed by governments prevented Australia from falling into a deep depression. But this stimulus only filled the hole left by lockdowns/restrictions and did not put the economy on a higher trajectory than it was on pre-COVID. To the contrary, Australia’s job growth has fallen over the pandemic, as illustrated clearly by mine and Gareth Hutchens’ charts above.

Hence, it was the shift in immigration from strongly positive pre-pandemic to negative that is behind the collapse in Australia’s unemployment and underemployment rates.

These are basic statistical facts that cannot be refuted by the ‘Big Australia’ lobby nor its captured economists. So stop lying about it.