There’s a global and therefore Australian recession likely coming in 2023. The process of it is pretty straightforward: the US central bank will tighten enough to hiccup demand. This stall will destock historically high inventories and spill over to trade shocks in Europe and China where economies are already on their knees thanks to combined energy, property and zero-COVD shocks. It will hit Australia via the combined effects of tumbling commodity and house prices.
So, how does one plan for this in a policy sense?
First, one should tighten fiscal policy in advance to take pressure off the central bank so that it is not forced to over-tighten, as well as to ensure there are counter-cyclical resources to deploy when the economy sours. Is Albo doing this? No.
Second, as unemployment rises, automatic stabilisers like unemployment benefits become crucial to preventing the downturn from feeding upon itself. Is Albo giving priority to boosting the dole given how poverty-stricken it now is? No.
Third, one readies to cut immigration numbers to take pressure off both unemployment and falling wages. Is Albo readying to do this? Pfft:
Unions and employers have backed the case to boost migration from 160,000 to 200,000 places a year in a crucial step to a wider deal on jobs after all sides accepted the need for urgent changes to fix chronic labour shortages.
The growing consensus on migration is an early sign of common ground at the federal government’s Jobs and Skills Summit and clears the ground for Prime Minister Anthony Albanese to increase the permanent intake in the October 25 budget.
But industry chiefs and union leaders are at odds over visa conditions and the rates of pay for skilled foreign workers, with employers warning they cannot afford the $90,000 annual salary the unions want to see as the minimum benchmark for those who enter the country.
Leith has perfectly described the structural impact that these policies will have. I would like to add that the timing matters as well. “Skills shortages” are going to be gone next year regardless. Indeed, there will a surplus as the recession takes hold.
This is the worst possible time to boost mass immigration. It will hammer wages and per capita consumption and living standards will fall further than they would otherwise.
Australian policymakers used to understand this. They would trim the migrant intake, or let the market do it, during downturns and rises in the output gap:
Amusingly, the OECD still sees Australia with a wide output gap this year and next. That’s because it’s not influenced by the usual pack of local business interests.
Alas, these days, we know that policy is made by the unholy conjunction of business and political psychos. Albo is the shining example, constantly castigating the Morrison Government for supporting Australians by allowing temporary foreign workers to return home during the pandemic.
What the baleful oligarchs get out of mass immigration resuming mid-recession is twofold:
- more warm bodies equals higher headline demand for banks, retail and houses;
- more warm bodies means higher headline GDP.
But, this “quantitative peopling” also results in worse per capita growth and income than otherwise. You get poorer while the unholy conjunction feathers its nest.
Either the Jobs and Skills Summit has absolutely no clue that recessionary conditions are coming down the pipe like an out-of-control locomotive, or they are ideologically, politically, and literally corrupt.
Neither interpretation is flattering for Albo’s cowards.
