From Judith Sloan on the weekend:
…part of the implicit contract with the government is that the governor of the RBA (and all other staff members) should be circumspect about what is written and what is spoken. In particular, RBA executives should refrain from commenting on policy matters that are not related directly to monetary policy.
Sadly, there are signs the present governor, Philip Lowe, has breached this covenant recently by making several inappropriate remarks. Even the more cautious former governor, Glenn Stevens, deviated from his normal course in the last few months of his tenure, talking about good and bad government debt and arguing the case for more government-funded infrastructure. He should have stayed mum on this topic.
But returning to Lowe, last year he expressed his opinion on the size of the immigrant intake in the following way: “Our immigration program I see as a source of national strength. To give that advantage up just so that we can take some pressure off housing prices, I find kind of problematic.”
And then in a recent speech, he made this very political remark: “Slow wages growth is diminishing our sense of shared prosperity.” Does he have any evidence that “our sense of shared prosperity” is contracting? How would you go about measuring this?
So let me put something out there — and note that I am paid to be an unconstrained commentator: if there is any diminution in our sense of shared prosperity, it is because of exorbitant housing prices. In turn, these over-the-top prices have been caused, in part, by the insanely low interest rates maintained by the RBA as well as our high immigration numbers.
For young people, in particular, the inability to get into the housing market as well as having to pay very high rents in the meantime ultimately will do more to upset our sense of shared prosperity than any short-term lull in wage growth. If the declining rates of home ownership are not reversed, one of the core assumptions on which our retirement incomes policy is based — that most retired people own their homes — will need to be called into question.
…A paper last year by Andrew Stone, Michael Gadiel and Vanty Tang (NSW Treasury Working Paper) sets out an empirical study of housing prices and migration flows, concluding that “shifts in Australia’s annual national migration intake have a potentially sizeable impact on housing prices”. According to the authors, “a large increase in average annual in-migration, such as occurred over the past decade, translates to a large increase in annual housing demand. In the absence of a correspondingly large increase in annual supply — and policymakers have for the past three decades persistently pointed to the difficulties in achieving such sustained increases — this would be expected to generate persistent upward pressure on national housing prices.”
Exactly right.
Judith and Phil Lowe can’t bring themselves to say so but exactly the same arguments apply to wages, the other component of “diminished shared prosperity”. Adding new cheap labour to a market with excessive slack will obviously lower prices:
This also disproportionately impacts youth. To wit, via Domainfax:
Overwhelming new evidence from current and former employees of Rockpool Dining Group includes hundreds of pages of leaked company documents, rosters and records of pay and hours.
…Since last week,The Age and The SMH have received more than 50 individual claims of exploitation from people saying they were workers and managers at the Rockpool Dining Group. Most are migrants on a range of visas.
The workplace regulator, the Fair Work Ombudsman, has been aware of the problem of exploitation for at least two years, and has received numerous complaints from workers.
…This week more than a dozen current and former chefs, nearly all on temporary work visas, told The Age and The SMH of the excessive overtime. They said they could not be named for fear of losing their jobs and being forced out of Australia.
Many likened their working conditions to slavery, with migrant chefs saying their visa status made them vulnerable to excessive work, significant underpayment and exploitation.
The deomstrated fact is that Australia’s current immigration levels are ungovernable for the labour market:
- For years we have seen Dominos, Caltex, 7-Eleven, Woolworths and many other fast food franchises busted for rorting migrant labour.
- The issue culminated in 2016 when the Senate Education and Employment References Committee released a scathing report entitled A National Disgrace: The Exploitation of Temporary Work Visa Holders, which documented systemic abuses of Australia’s temporary visa system for foreign workers.
- Mid last year, ABC’s 7.30 Report ran a disturbing expose on the modern day slavery occurring across Australia.
- Meanwhile, Fair Work Ombudsman (FWO), Natalie James, told Fairfax in August last year that people on visas continue to be exploited at an alarming rate, particularly those with limited English-language skills. It was also revealed that foreign workers are involved in more than three-quarters of legal cases initiated by the FWO against unscrupulous employers.
- Then The ABC reported that Australia’s horticulture industry is at the centre of yet another migrant slave scandal, according to an Australian Parliamentary Inquiry into the issue.
- The same Parliamentary Inquiry was told by an undercover Malaysian journalist that foreign workers in Victoria were “brainwashed” and trapped in debt to keep them on farms.
- A recent UNSW Sydney and UTS survey painted the most damning picture of all, reporting that wages theft is endemic among international students, backpackers and other temporary migrants.
- A few months ago, Fair Work warned that most of Western Sydney had become a virtual special economic zone in which two-thirds of businesses were underpaying workers, with the worst offenders being high-migrant areas.
- Dr Bob Birrell from the Australian Population Research Institute latest report, based on 2016 Census data, revealed that most recently arrived skilled migrants (i.e. arrived between 2011 and 2016) cannot find professional jobs, with only 24% of skilled migrants from Non-English-Speaking-Countries (who comprise 84% of the total skilled migrant intake) employed as professionals as of 2016, compared with 50% of skilled migrants from Main English-Speaking-Countries and 58% of the same aged Australian-born graduates. These results accord with a recent survey from the Bankwest Curtin Economics Centre, which found that 53% of skilled migrants in Western Australia said they are working in lower skilled jobs than before they arrived, with underemployment also rife.
- The Australian Bureau of Statistics (ABS) latest Characteristics of Recent Migrants report, revealed that migrants have generally worse labour market outcomes than the Australian born population, with recent migrants and temporary residents having an unemployment rate of 7.4% versus 5.4% for the Australian born population, and lower labour force participation (69.8%) than the Australian born population (70.2%).
- ABC Radio recently highlighted the absurdity of Australia’s ‘skilled’ migration program in which skilled migrants have grown increasingly frustrated at not being able to gain work in Australia despite leaving their homelands to fill so-called ‘skills shortages’. As a result, they are now demanding that taxpayers provide government-sponsored internships to help skilled migrants gain local experience, and a chance to work in their chosen field.
- In early 2018 the senate launched the”The operation and effectiveness of the Franchising Code of Conduct” owing in part to systematic abuse of migrant labour.
- Then there is new research from the University of Sydney documenting the complete corruption of the temporary visas system, and arguing that Australia running a “de-facto low-skilled immigration policy” (also discussed here at the ABC).
- In late June the government released new laws to combat modern slavery which, bizarrely, imposed zero punishment for enslaving coolies.
Both the housing bubble and weak wages expose the RBA for what it is, a housing bubble manager not monetary policy overseer. High immigration supports the RBA’s much loved housing bubble and so wages be damned.
Other central banks have prosecuted similar class wars by keeping asset prices inflated and wages suppressed via lower bound and unconventional policies. But the RBA is unique in adding mass immigration to prosecute the war with even greater ruthlessness…and hypocrisy.
