Cut immigration to reduce unemployment

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By Leith van Onselen

The Reserve Bank of Australia’s minutes, released today, contained an interesting morsel noting that lower population growth (immigration) has likely improved the unemployment rate:

Members noted that the latest estimates indicated that the population had increased by 1.4 per cent over the year to the December quarter, down from a peak rate of growth of 1.8 per cent over 2012. The slower growth was primarily accounted for by a decline in net immigration, which was particularly pronounced in Western Australia and Queensland, consistent with weaker economic conditions in those states. Members observed that the lower-than-expected growth in the population helped to reconcile the below-average growth in output over the past year with a broadly steady unemployment rate…

Recent data indicated that employment had grown more rapidly than the population and the unemployment rate had been relatively stable since the latter part of the previous year. The easing in population growth over the past year helped to reconcile below-average growth in output with the relatively steady unemployment rate.

Chalk this up as yet another tick in the box of lower immigration.

Not only would a lower rate of immigration significantly reduce strains on Australia’s already stretched infrastructure, improve housing affordability, and ensure that Australia’s resources base it not unnecessarily diluted, thus improving living standards of the existing population. But in times of slack labour demand, as exists currently, it also improves the unemployment rate, other things equal.

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Viewed in this light, the Abbott Government is crazy to attempt to open the floodgates on temporary workers.

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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.