In the short term, less migration will keep unemployment at below 5 per cent next year and the year after. It will cyclically help bump up wages growth and inflation, as the Reserve Bank has long been seeking.
But RBA governor Philip Lowe noted in the same breath last July that turning off the tap of foreign labour also means “less investment, less confident business, less output, less capital stock, and a less dynamic economy”.
Without migration, it will prove far harder to grow our way out of the $1.1 trillion in gross debt by 2025, outlined in last week’s midyear economic outlook. Migration usually contributes about 1 per cent of GDP a year, and working-age migrants who become residents put more into government coffers than those born and educated in Australia.
It is migrants who will pay for the ageing of the existing workforce. On top of Australia’s higher debts, the cost of ageing is rising beyond expectations. The OECD says that stalling population growth could leave state and federal debt hovering around 70 per cent of GDP. The number of tax-paying workers supporting each retiree has fallen from 7.3 in 1975 to four.
With Australia stuck in a vice between pandemic debt, ageing and a falling birth rate, migration is one of the few solutions.
To its credit, the federal government has not stepped back from allowing in 200,000 existing skilled and student visa holders.
But it is fighting an election on a cost-of-living theme, and the prospect of wages rising again….