RBA: No immigration means wage rises

The Reserve Bank of Australia (RBA) has released its Statement on Monetary Policy, which explicitly notes that Australia will face “wage pressures” if the international border remains closed to migrants:

The effects on labour supply have been observed mainly in some labour supply shortages in the industries that typically employ a larger share of migrants…

Given the current domestic availability of labour, strengthening labour demand as the economy transitions from recovery to expansion is likely able to be met from within the domestic population in the near term.

However, a sustained period of economic recovery could lead to wages pressures emerging more quickly if new labour supply remains constrained, particularly and foremost in areas of domestic skills shortages…

The longer border restrictions remain in place… the more likely that localised labour shortages could translate into some wage pressures as the economy continues to strengthen.

Given that lifting wage growth is now a priority of the RBA, will it now speak out against the Morrison Government’s plan to reboot immigration to pre-COVID levels by:

  • Abolishing labour market testing requirements;
  • Lowering costs and speeding up approval times for importing foreign workers;
  • Expanding the skilled occupation list to include almost any role;
  • Providing all ‘skilled’ visa holders with a clear pathway for transition to permanent residency; and
  • Granting ‘skilled’ visa holders priority access to flights and hotel quarantine ahead of stranded Australians.

Rebooting immigration via the above would obviously lift unemployment and lower wages (other things equal), thereby working against the RBA’s employment and wage goals.

Unconventional Economist

Comments

  1. StephenMEMBER

    This is a disaster. Now businesses might have to go back to having to actually train local people to be able to do jobs, instead of just importing low-wage labour! Shock horror!

    More seriously though, this will be a bit of problem for politicians, given that they’ve been busy for the last few decades destroying TAFE around the country…

    • Lord DudleyMEMBER

      BuT iF wE iNcReAsE wAgEs, It’Ll MaKe OuR eXpoRtS uNcOmPeTiTiVe!!111oneoneeleventy

      …proceeds to gut every remaining trade exposed industry in the nation…

    • Yes, they seem confused about how real capitalist economies work, well it was probably before they started work the last time it did.
      Here is the Australian Institute new video making same point & talking about skills shortage
      https://youtu.be/4xG1N2x6x6w

  2. My heart bleeds for all the plantation owners who can’t get dem slaves…

    The Factor Price Equalisation theory, a cornerstone of any University Trade Economics course.

    • It would probably cost the farm owners 3 years worth of Lobbying to modernise their methods. Then they will be productive the proper way. Thats what has happened in most industries over and over. These people would have us all back in horse and carts. On the other hand they do enjoy exploiting people, makes em feel important.

  3. Without wage inflation nobody will be able to sustain their mortgages when interest rates rise by 0.5%. Inflation is baked into this cake.