International students are needed for cheap labour

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Bank of Queensland CEO George Frazis has emphasised the need to prioritise the return of foreign ‘skilled’ workers and international students to alleviate so-called chronic labour shortages:

Mr Frazis… stressed that Australia had to address labour shortages and other underlying issues by having firm plans to expedite the return of skilled workers and overseas students.

“We do need to think about as a priority … how do we get skilled labour safely into Australia and then I think also it’s important for us to get foreign students back into Australia in a safe way,” Mr Frazis said.

“There’s absolutely no doubt, in terms of the feedback that we’re getting from our customers, that finding skilled labour is really difficult.”

So this is basically an admission by Frazis that international students are not a genuine ‘export industry’, but instead a people importing industry used to provide cheap foreign labour to cafes and other businesses.

This also begs the question: are these students here to study or to work? Is the goal to sell education as an export, or to import low-skilled workers who aim to stay here permanently or for very long periods?

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These international students compete for jobs with young Australian-born residents, routinely have their wages stolen and, in the process, drive down wage growth.

Indeed, the recent strong labour market results have been driven in part by the sharp reduction in international students competing for jobs in the labour market.

Professor Gary Banks – the long-time former chief of the Productivity Commission (PC) – also shredded the ‘skilled’ migration system in a speech delivered last month:

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The Productivity Commission [found]… that, under realistic assumptions, immigration does little for either participation or productivity nationally in the long term, with income gains in per capita terms small and largely skewed to migrants themselves.

Moreover, while highly skilled migrants are good for the economy, and sectors like mining in particular, and should be encouraged, the average skill level for the intake as a whole in recent years has not been high.

When externalities such as congestion and housing affordability are taken into account, I’d suggest that the optimal level of net immigration for Australia could be closer to Treasury’s forecast in the first IGR of 90 000 than the latest one.

Sadly, it is so much easier for industry to lobby the federal government for migrant workers than bidding up wages, investing in training local workers and selling to a stable number of consumers.

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.