The RBA has released its latest Bulletin, which contains an interesting morsel noting that lower population growth (immigration) has improved Australia’s unemployment rate:
Growth in the aggregate labour force appears to have responded to developments in labour demand and real wage growth. The unchanged real consumption wage and more limited job opportunities since the end of the mining investment boom may have made working in Australia less attractive, particularly as labour market conditions have improved overseas. This appears to have been reflected in a decline in population growth owing to a fall in annual net immigration (Graph 12).
This partly reflects the departure of temporary workers as many mining-related employment contracts have come to an end. However, there has also been a larger net outflow of Australian citizens and a smaller net inflow of New Zealand citizens and working holiday makers since the end of the mining investment boom. This decline in net immigration has helped the labour market to adjust without the unemployment rate increasing as much as it otherwise might have done. In addition, the labour force participation rate declined by 0.6 percentage points between 2011/12 and 2014/15, although it has recovered somewhat of late. As in the upswing, the decline in the labour force participation rate was most pronounced in the mining states (Graph 13).
It’s certainly a welcome counter point to the conga line of industry groups urging the government to boost Australia’s immigration rate in order to overcome mythical labour shortages.
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.
