Australia continues to create more jobs

The Australian Bureau of Statistics (ABS) has just released its Labour Force statistics for January 2011.  The data shows that January’s unemployment rate remained unchanged at 5.0%.

Over the year, Australia has created more than an additional 330,000 jobs, almost 264,000 of which were full-time position with the remainder part time.  Employment participation across the country is also now at an historic high, recorded at 69.5%.

Over the past five years, Australia has created an average of 271,209 jobs annually and on average almost 159,000 of these jobs that have been created are full-time jobs.  Important to remember is that the last five years includes the Global Financial Crisis (GFC), a time in which many jobs were shed in Australia and the global economy stalled.

Over the five years to June 2009, Australia had been welcoming an average of 237,180 overseas migrants each year.  Now obviously not all of these migrants were adults and in a position to be in the workforce however, clearly many have provided much needed employees for Australian industry and helped fill some of those job vacancies.  At the last election the Federal Government announced that they were planning to cut migration back to around 170,000 persons annually which is well below the five year average level.  With the unemployment rate already tight, participation rates at all-time highs and fewer migrants heading to Australia, who is going to fill all these jobs we keep creating?

If the Federal Government does not revisit migrant intake volumes the country may face an extreme skills shortage.  Already with the unemployment rate likely to head below 5.0% it would seem that this will potentially lead to increasing competition for employees and subsequent wage growth, it may also lead to increased discretionary spending due to increased disposable incomes, both of which are likely to be inflationary and may lead to even higher interest rates.

Given these factors, I believe that it is important that the Government re-visits immigration numbers, particularly skilled migration numbers and looks to encourage more immigrants to Australia.  Not only will it assist in filling some of our skills shortages it may also help increase our economic growth and curtail future interest rate increases.  Please let me know what you think?

About Cameron Kusher

Cameron Kusher is Head of Research at CoreLogic, specialising in primary and secondary data analysis, property market commentary and consultancy. Cameron has a thorough understanding of the fundamentals such as demographics, trends, economics and spacial analysis and is a regular keynote speaker for property-related groups, regulated industry bodies, corporations and the government sectors. Follow Cameron on Twitter @cmkusher

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12 Responses to Australia continues to create more jobs

  1. Leith February 11, 2011 at 1:33 pm #

    Cameron. The economic case for high immigration is mixed at best. The Productivity Commission (2006) simulated the economic impact of a permanent increase in skilled migration of 50% on the level in 2004-05 and found that it would reduce average productivity, although there would be a slight increase in per capita GNP. Importantly, however, most of the income gains accrued to the migrants themselves rather than the pre-existing population.

    A country with a rapidly growing population needs to devote resources to building more roads, schools, shops, houses, factories, and so on than a country with a low rate of population growth. In a country with a low national savings rate, like Australia, rapid population growth is likely to put sustained upward pressure on real interest rates and, in turn, the real exchange rate, making it harder to achieve the per capita income gains that we all aspire to.

    Furthermore, Australia earns its way in the world mainly by selling its fixed mineral resources. More people means less resources per capita. A growing population also means that we must deplete our mineral resources faster, just to maintain a constant standard of living.

    The Government should, instead, focus on policies aimed at boosting workforce participation and productivity, rather than continually relying on ever-increasing population growth to keep the Australian economy growing.

    It is living standards that matter most and, on this count, rapid population growth is likely to produce negative outcomes for Australia’s existing residents.

    • Cameron Kusher February 11, 2011 at 1:53 pm #

      Hi Leith

      I certainly agree with plenty of your comments. Both sides of politics have been lightweights over a long period of time with regard to dedicating enough resources towards infrastructure upgrades and improvements. I also agree that it would be more beneficial to encourage a greater number of people into the workforce however, the current participation rate of 69.5% is the highest ever and still only indicates that less than three out of every four people are actively either working or looking for work. If this is the highest it has ever been how successful are we really going to be at getting these non-participants participating outside of scrapping Social Security?

      I also think there are definately signs that Australian’s are starting to save more and paying debt (let’s hope it continues) as I think the impact of the GFC has been that many Australian’s realise high leverage and lots of debt isn’t the answer (even Glen Stevens has commented on this fact). Let’s hope it continues and people don’t start to forget what can happen in economic downturns over the coming years.

      I am certainly not recommending we return to the recent peaks in migration however, I do think we can allow more people in than we currently are. Certainly a greater investment in infrastructure and a serious focus on housing affordability would help either with or without the higher immigration rate however, when has any Government really gotten serious about either? I don’t believe we even need to attract these people to move here for the rest of their live, Europe and the US economies continue to struggle, why don’t we attract some of the skilled unemployed to Australia in order to cater to our significant requirement for additional workers?

      I would love to hear any further comments.

  2. Leith February 11, 2011 at 2:53 pm #

    All fair points Cameron. From a totally selfish viewpoint, temporary skilled visas are the way to go since we benefit from the workers’ productive capacity without many of the downside costs (e.g. education and old age pensions/health care).

    As you probably guessed, I am a population growth sceptic. For the past five years, Australia’s population has grown at around 1.8% per annum which, in my view, is far too high. Over that period I have watched Melbourne’s trains become more over-crowded and unreliable, and traffic congestion worsen. Certainly, quality of life for the man on the street has worsened due, in part, to increasing population.

    Besides, our population cannot grow indefinately. To illustrate this point, at constant 1.8% growth our population would double every 40 years, meaning that in two lifetimes (160 years) Australia’s population would be around 350m! I realise that I have used an extreme example here, but at some point Australia needs to ‘bite the bullet’ and stabilise our population, irrespective of pressures from ageing, skills shortages, etc. Small growth rates can have devastating consequences over the longer term.

    In my view, we should be stabilising our population now whilst we have ample natural resources at our disposal and abundant oil reserves. It’s only going to get harder the longer we wait.

    Cheers Leith

  3. Jeff February 11, 2011 at 8:37 pm #

    Hi Cameron,

    I am an Aussie living in Europe and have seen unemployment rates here amongst skilled workers increase over the past couple of years. I understand that the 2010/11 Federal budget made 113,850 skilled migration visas available through the skilled migration program. I’m not sure of your blog rules on posting web links but out of interest see the following private sector contributions to the effort of skilled worker migration, the second of which can be found in numerous different languages. I am not involved at all with them and only heard about it through an Irish client who saw promos at a recent Dublin job expo.

    http://www.downunderexpo.com/

    http://www.ausfis.org/

    So maybe there will be an influx of skilled migrants in the near future. What with social unrest in North Africa and the Gulf states as well as high unemployment in the PIIG nations, the potential pool of migrant workers is widespread.

    Cheers,

    Jeff

    • Cameron Kusher February 14, 2011 at 2:57 pm #

      Hi Jeff

      Thanks for the comments, it certainly will be interesting to see and you would have to think there are some pretty talented individuals out there at the moment who would be interested in working and living in Australia, even if it is for just a few years.

      Cheers

      Cameron

  4. Shadow February 14, 2011 at 2:40 pm #

    In my opinion it won’t be long before business and industry are once again crying out for the skilled migration intake to be increased due to severe skills shortages in the economy.

    Skilled migrants, on a per annum basis, pay more towards Australia’s infrastructure, and make less use of that infrastructure, than people born in Australia.

    The majority of migrants to Australia are skilled (via the skilled migration program). These skilled migrants on average earn more money than average Australian-born people, and therefore they also pay more tax. During the time these skilled migrants are here, they pay more on a per capita basis towards infrastructure than Australians who were born here, due to their higher tax contributions.

    Furthermore, Australians who were born here spend around 20 years utilising the infrastructure for free before they become productive and start working. During that time they are a financial drain to the economy, because they require use of the education system, healthcare and other infrastructure. Skilled migrants don’t get to use this infrastructure for free for 20 years – they arrive, start working right away, and pay more tax than average Australians while they are here.

    (A much smaller number of migrants enter via the family migration program. These migrants must be able to demonstrate that their Australian family can support them while they are here, and they are not eligible to utilise healthcare and some other services for a number of years).

    In summary, Australian migrants on average contribute more towards Australia’s economy and infrastructure than people born here.

    I have posted about this on the Australian Property Forum thread below…

    http://s4.zetaboards.com/Australian_Property/topic/8412093

    Cheers,

    Shadow.

  5. Ahmed February 14, 2011 at 2:41 pm #

    Yes prices are falling and rental property stock is on the rise, bring on the immigrants to fill these stocks and inflate the prices and create demand…

    • Cameron Kusher February 14, 2011 at 3:18 pm #

      Hi Ahmed
      That is not what we are proposing at all. We have continually stated that for the next 12 months we expect limited price growth and potentially some falls if interest rates happen to increase rapidly. The residential market has already been softening since May 20110. Even if we were to see a huge influx of migrants I would doubt it would have much impact on the marketplace as they would still account for a miniscule amount of the overall market and interest rates in Australia are already restrictive, not to mention that the FIRB has tightened rules surrounding foreign ownership.

      We have been expecting that rental markets will tighten during 2011 with or without migrants. First home buyer numbers remain quite weak, minimal new development is occurring (particularly of inner city units which are prime rental stock) and vacancy rates have been tightening. Not to mention that with the supply imbalance we have been witnessing either rents growing or values growing in recent years, with value growth likely to be a non-event this year, demand for rental accommodation is expected to increase .

      Regards

      Cameron

      • Ahmed February 14, 2011 at 4:37 pm #

        Hi Cameron
        Thanks for the comments, but as someone living in western suburbs in Parramatta area, things are bit different, and having a RE as friend, it seems there is a new immigrant at his desk every day for rental property they cant afford and they wait until finally they get the place at a reduced price or look other places or worst share…It seems that rental prices are going down only and cant agree with that it is going to rise any further..compounding to the fact is that many many students have already left Australia…For established renters there is actually bargains in rental stock..It was not the case same time last year…

  6. Cameron February 16, 2011 at 8:20 am #

    Cameron. Cameron here. What do you think will happen if we do not increase migration? I beleive that the shortage of workers will cause wages to increase, benefitting us all. Is that not a good thing? Should you not be supporting this? If my wages increase I plan to buy an investment property in Mt Isa and invest the rest of my money in limited edition collectable plates from Franklin Mint. If your wages increase how do you plan to position yourself Cameron? Cameron.

  7. Jeff February 16, 2011 at 7:52 pm #

    To “Cameron here”,

    Did you not read Cameron’s bit about the worker shortage leading to wage growth whereby it is inflationary and may lead to even higher interest rates? Wage growth is not necessarily a good thing as it may lead to your carton of milk being more expensive and increases the mortgage repayments on your Mt Isa investment property thus nullifying your pay rise.

    Cheers,

    Jeff

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