RBA fail: Migrant visa boom crushing Australian wages

In testimony on Friday to the House of Representatives Standing Committee on Economics, Reserve Bank of Australia (RBA) governor, Phil Lowe, blamed increasing labour supply from females and older Australians for holding down Australian wages:

What’s happened is that increased demand for labour has been met with more labour supply, especially by women and older Australians. Reflecting this, a higher share of the Australian adult population is participating in the labour market than has ever been the case before. I want to be clear: this is very good news. But one of the side-effects of this flexibility of labour supply is that it’s proving harder to generate a tighter labour market and so, in turn, it’s been hard to generate a material lift in aggregate wages growth.

Looking forward, while some slowing in employment growth is expected, the central scenario is for the unemployment rate to move lower to reach five per cent again in 2021. If things evolve in line with this central scenario, it’s probable that we will still have some spare capacity in the labour market for a while yet, especially taking into account underemployment. This means that the upward pressure on wages growth over the next couple of years is likely to be only quite modest and less than we were earlier expecting.

One can only wonder why Phil Lowe chose to ignore the biggest driver of Australia’s rising labour supply: immigration.

As we already know, net overseas migration (NOM) into Australia has surged over recent years, as illustrated by the next chart:

NOM is also directly responsible for more than 60% of Australia’s population growth.

The lion’s share of recent migrants are of prime working and, therefore, have high labour force participation. This necessarily means that they are the key driver of labour supply and the primary reason why “demand for labour has been met with more labour supply” and why “it’s proving harder to generate a tighter labour market and so, in turn, it’s been hard to generate a material lift in aggregate wages growth”.

Indeed, a recent paper by Melbourne University Professor, Peter McDonald, found that around three quarters of employment growth in Australia between 2011 and 2016 was attributed to immigration:

The permanent and temporary skilled migration policies established by the Australian Government from 1995 played an important role in meeting that labour demand, especially in the boom years of the first decade of the 21st century…

From July 2011 to July 2016, employment in Australia increased by 738,800. Immigrants accounted for 613,400 of the total increase…

Migration has had a very large effect on the age structure of employment with most new immigrant workers (595,300) being under 55 years.

Clearly, then, the ongoing supply shock from immigration is unambiguously the primary reason why labour supply continues to outrun demand and why Australian wage growth remains anaemic.

The RBA has also conveniently ignored the systemic wage theft from temporary migrants, which has become entrenched across the entire Australian economy:

Entire industries have become heavily reliant on migrant workers to perform low-skilled work in the labour market for below award rates, which is unambiguously undercutting local workers and lowering overall wage growth.

If anything, the rise of female and elderly participation is a response to the failing wages growth arising from the mass immigration model as it destroys industrial relations, leaving households no choice but to work harder and longer.

In short, the RBA needs to examine the issue honestly and admit that the mass immigration ‘Big Australia’ policy is a key driver of Australia’s wage crisis.

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. It must be time for the monthly rant against Aussie workers. The latest line? Aussies are terrible for working less than 7 days per week:

    seven days a week for 20 years.

    you’ve got to work hard to make money.

    the vast majority of labourers on building sites were now people from overseas

    took home around $1000

    So work 7 days per week for $1000. What a dystopia the fake left has created.

    Around 60 per cent of employers trying to fill lower-skilled positions reported issues such as a lack of qualified or experienced applicants

    If it is unskilled work, the recruiters should not be asking for any qualifications.

    • Taxes on wages are too high. Wages are too low. The price of land is too high. It doesn’t matter how hard one works. The payments to the bank are too high because of the repayment of principle not interest.. It doesn’t pay to work anymore, Young people are shafted.

      • You should be grateful you get any wage. Between Jacob’s UBI and LVO’s beloved Grattan, where all income is really an occult government tax break, you should drop to your knees and give thanks that anything is deposited into your account for your labour.

  2. Phil’s only trying to protect his $22K fortnightly net pay. This is straya, its every man for himself. He utters the word immigration even once, he’ll have to be content on his $300K indexed pension whittling wood on his rocking chair whilst attending the twelve or so board meetings at the banks he’ll be moonlighting at. The current gig is money for jam.

    • Jimbo. you might have noticed that Dutton has had to give the AFP a public directive, would they please grovel a little more subtly. One can almost see the same thing happening with Frydenberg and RBA.

  3. Jumping jack flash

    Bringing down wage inflation was always the plan! It started with Howard and the RBA and their scare campaign about interest rates back in 2007.

    It has continued to this day!

    Nobody remembers what the plan was meant to achieve so they blindly follow the plan.

    But now with unintended consequences, the plan to lower wages to stem interest rates has been put to use by the top tier employers to maximise their own income which allows debt to grow and grow the economy.

    Indeed without wage theft over the past 5 years we would have had wage deflation. It is only statistics that have shown wage inflation of any kind over that period. The only difference now is that the statistics can no longer paint the rosy picture and the stark reality is finally revealed.

    Make no mistake, if the statistics that are manipulated to show rainbows and lollipops now show difficult times, then the real situation is going to be a lot worse.

    • reusachtigeMEMBER

      If I were an old person I’d be p1ssed off too considering how much more expensive cruises down the Danube are now because rubbish pr1cks keep crying for a lower dollar.

      • ErmingtonPlumbing

        Lol,…Best call in this thread.
        Good work Mr Bogan.
        My Boomer inlaws can’t even use internet banking,…but yes learn to Code you old retired pricks if ya ain’t got any money.

      • Mining BoganMEMBER

        The comments annoyed me. Young’uns can’t get work because immigrants/no jobs and they need to forget their skills and experience and lower their expections. Oldies can’t get a job because immigrants/no jobs and complain about their skills and experience not giving them a parachute in.

        Place is stuffed. We all need to burn together for the awakening to happen.

      • We’ve run an over-valued A$ for 60 years or more. It is THIS that has hollowed out Australian industry and destroyed rural Australia. We’ve lost the industries that generate decent pay for middle Australia. All we are left with is Banks and Retail shopping chains that require little labour for their sales and profits.
        The immigration debacle is mainly aimed at keeping this debt driven consumption frenzy going ever faster forever.

  4. yeah and Aussie workers picked Liberals (or Labor) to further champion their neoliberal policies of immigration, outsourcing, anti-unionism, closure of manufacturing, …
    to paraphrase Steinbeck: … because Australians don’t see themselves as exploited proletariat but aspirational multimillionaires currently struggling with monthly bills

    not that they have much choice either but loving the system makes them more likely to stay slaves forever

  5. Something I wish some senator would ask Phil is: “How many investment properties do you own, Phil?”
    and “How can you set interest rates without a conflict of interest”

    • Fair enough, but you might want to ask said senator, ” How can you set laws on virtually everything without a conflict of interest?”

  6. Comments here suggest that increasing inequality leads to increasing dog eat dog behaviour. One group of society disparaging and denying the needs of other groups. Still having compassion for Phil is a big ask.

  7. I can’t see how the RBA can ever fulfill its mandate without controlling both interest rates and immigration rates. The RBA mandate goes “RBA duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Under the current setup even if RBA was honest about impacts of immigration on wage growth the Government still unlikely to take heed.