Peter Martin celebrates immigration collapse

Advertisement

As we know, Peter Martin is a rabid supporter of the ‘Big Australia’ mass immigration policy (see here, here, here, and here). So it was interesting reading Martin celebrate the collapse in Australia’s unemployment and underemployment rates to 2008 lows, as well as urge the federal government to drive unemployment below 3%:

The unemployment rate hadn’t been cut artificially by people withdrawing from the search for work because of lockdowns (as had happened temporarily earlier in the year). Unemployment fell by 62,200 in December because an extra 64,800 people found work.

The proportion of the population aged 15 and over in work is the truest measure of employment, because it’s unaffected by whether or not someone calls themselves unemployed. In December last year, that had climbed to 63.3% – a record high…

To get below 4% from here on, and to get below the previous long-term low, would only require an extra 25,000 people in jobs.

That’s what makes a budget forecast of an unemployment rate beginning with a “3” – the first since the 1970s – suddenly plausible…

An unemployment target of 2-3% would be game-changing, and it’s within reach. The last side of politics to preside over ultra-low unemployment was the Coalition, making it natural that Morrison and Frydenberg should take up the mantle of Robert Menzies and his treasurer Harold Holt.

If they won’t, it’s an opening for Labor. There’s a chance to all but eliminate unnecessary unemployment in Australia. Not in 50 years have we been this close.

As usual, Peter Martin failed to mention the key reason why the unemployment (and underemployment) rate has fallen so sharply: the collapse in immigration:

Advertisement

Instead of importing more than 180,000 migrant workers every year – as was the case in the decade pre-COVID – Australia actually lost tens-of-thousands of migrant workers.

In turn, the size of Australia’s labour force has flatlined over the pandemic:

Advertisement

Had the pre-COVID level of immigration continued through the pandemic, there would be roughly 460,000 more workers in the economy:

Does anybody seriously believe that Australia’s unemployment rate would be so low if there were 460,000 more workers in the economy? Clearly not.

Advertisement

Thus, stimulus-driven jobs growth in the face of a stagnant labour supply is the reason why the employment-to-population ratio has risen to its highest ever level and the nation’s unemployment rate has fallen to its current 2008 low:

It is also why Australia’s underemployment rate has fallen to its lowest level since 2008:

Advertisement

The only way the federal government can achieve Peter Martin’s “game-changing” 2% to 3% unemployment rate is by jettisoning his beloved mass immigration ‘Big Australia’ policy in conjunction with more fiscal spending. Because returning to pre-COVID levels of immigration will sharply lift labour supply and thereby lift the unemployment rate.

Sadly, the federal government has already committed to importing at least 200,000 migrant workers into Australia by July:

Advertisement

“We are working on a figure of 200,000, it may well be more than that but we will be actively looking to bring as many people into Australia as soon as we possibly canKaren Andrews, 22 November 2021.

This announcement effectively brought forward the Intergenerational Report’s (IGR) projection of 235,000 annual net overseas migrants from 2025-26 onwards:

Advertisement

With the labour force set to expand so rapidly, just as it did in the decade pre-COVID, Martin’s goal of 2% to 3% unemployment will become a pipe dream.

It’s time for Peter Martin to drops his cognitive dissonance and admit that mass immigration is incompatible with achieving sustainable low unemployment.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.