The Australian economy and its effect on migration policy

[Mach]

Hey guys,

Don't know if you've all been following the financial world extra keenly after September 23, but it seems that the Australian economy has not only turned the corner, but is starting to move up through the gears.

For example:
- Unemployment is peaking earlier and lower than expected at 6.75% in Q2, 2010 (a 8.5% peak forecast for June 2011)
- The economy grew at 1% last year when most other countries struggled and is forecast to grow at 1.5% (-0.5%) next year
- GDP is also set to grow faster than expected at 1.75% (0.5%) in 2009 and 3.25% (2.25%) in 2010.

I realise we are not out of the woods yet. And I'd be a fool to suggest this will have an overnight effect on migration policy and lead to the Government re-evaluating September's bout of knee-jerkism. But at least Mr. Evans will soon have to look elsewhere for his first best excuse for messing us all around.

Sources:
2nd UPDATE: Australian Govt Ups Economy View; Deficit To Stay - WSJ.com
RBA Says Australian GDP to Grow Faster, Rates to Rise (Update4) - Bloomberg.com

[connaust]

I still have concerns that macro numbers are focussed on by media and politicians, but the real economy is ignored. We all know about under employment plus definitions of unemployment etc., and also how population data can be distorted....

Issue remains related to economy, migration and skills, is how to more accurately target skills shortages, plus where and when?

Ideally new policies should be about keeping people away from capital cities...... where most Australians prefer to bunker down but creates imbalances in property prices, job opportunities etc. ..... to encouraging more regional (development).

Finally, the "Elephant in the Room", Australia has the highest debt to household income in the world, high net foreign debt, and decades of persistent current account deficits ..... when is all this debt (built up since 70s) going to start decreasing... would need the economy to slow?

[Mach]

Hey Connaust,

Another economist, cool!

Agree with all your points. Never did an economy need a recession to clear the decks more than Australia. No doubt "the catastrophe that was 'skillfully' avoided" will be a blunt instrument that Rudd and Swan will use to beat the Liberals over their heads with come November, 2010.

Regarding the way forward, I agree that more movement has to take place outside of Sydney, Melbourne and Brisbane. And without wanting to regurgitate my ire at the way WA and SA have been affected by the federalisation of States' rights to sponsor applicants, I'd say that the new system of checks and balances regarding SS will be very interesting reading indeed. However, the fact they mismanaged the SIR pathway long before they stuffed up GSM in 2009 does not bode well for them prioritising regional areas in January.

I fear the debt issue is not going to be fixed any time soon, however, as Australian interest rates have traditionally been one of the most volatile of all the G20 economies. Look at the historical data below and there's no wonder that household debt is something like 160%+ of disposible income in Australian households. Indeed, Australia sees them as the best way to fight inflation so I doubt we've seen the last of periods of extremely high interest compared to Europe.

HISTORICAL INTEREST RATES AUSTRALIA

[wanderer]

Mach,

For example:
- Unemployment is peaking earlier and lower than expected at 6.75% in Q2, 2010 (a 8.5% peak forecast for June 2011)
- The economy grew at 1% last year when most other countries struggled and is forecast to grow at 1.5% (-0.5%) next year
- GDP is also set to grow faster than expected at 1.75% (0.5%) in 2009 and 3.25% (2.25%) in 2010.

I realise we are not out of the woods yet. And I'd be a fool to suggest this will have an overnight effect on migration policy and lead to the Government re-evaluating September's bout of knee-jerkism. But at least Mr. Evans will soon have to look elsewhere for his first best excuse for messing us all around.

I'm pleased you did put in I realise we are not out of the woods yet. Matt, because in some ways we've not really entered the woods yet for a couple of reasons.
. The government has splashed around cash hand-outs and funded various other programs all designed to stimulate the economy and sure it has had some desired impact in keeping unemployment from soaring quicker.
From a $20B surplus budget left by the outgoing government, that has all been frittered away to have a deficit of whatever it will be, can't remember what was budgeted for this year, but a significant deficit nd that'll be with us for a long time.
. And then there's the dominoe effect or lag that works for Oz something like:
US/Europe in decline, China's factories slow, Use of resources slow, Australia's economy slows.

Both factors have kept us out of the woods and yet we'll likely be bogged in the swamp with Crocs snapping soon enough.
The government is obviously delighted with such figures you've posted but you do need to remember they are forecasts and revisit the scene in 12 -18 months and it could be starting to look horribly different.

As Andrew indicates, there are also underlying unhealthy finances too.

[wanderer]

And Mach,

Regarding the way forward, I agree that more movement has to take place outside of Sydney, Melbourne and Brisbane. And without wanting to regurgitate my ire at the way WA and SA have been affected by the federalisation of States' rights to sponsor applicants, I'd say that the new system of checks and balances regarding SS will be very interesting reading indeed. However, the fact they mismanaged the SIR pathway long before they stuffed up GSM in 2009 does not bode well for them prioritising regional areas in January.

A lot of people fail to realise that Australia is a bit unique in its population distribution, not that we do not have people who are not attracted to living in more populous centres for whatever reasons, just like other countries, but there are limitations.

We have this huge swag of sandy countryside called desert that takes up a huge percentage of the land mass.
And even before you get to the desert there is some very marginal country, a lot offarming practices here which were brought from Europe have been found to be not ideal in many regions and there is a huge reliance on irrigation schemes that are helping to bleed out major rivers dry, not that a lengthy drought has helped either.

Even Perth and Adelaide have water issues, as has Melbourne and other Victorian regions, large scale desalination plants in progress in Queensland and also Victoria but they are not the real long term best answer.

A high % of population does live coastal for the above reasons and sure it would be great if more larger regional cities were established or existing ones expanded faster but you still need employment for the people and you'll find that employment in regions [other than say a dedicated mining centre] will always be higher than that of higher population capitals and nearby coastal regions.

The federalism of states rights to sponsor is a bit of BS for again a look at states nomination lists will show a close following of the SOL and théy are not nominating because of vacancies but it is merely a process they can all offer in an attempt to grow their states whether or not they have jobs available.

If in fact WA may have more vacancies in some categories because of a resources project, attracting the unemployed or underemployed from elsewhere is a most practical way of developing decentralisation.

Mismanagement of SIR?, and which pathway is that?

[SimonB]

On the lurking dangers to the Aus economy. I have heard some interesting mutterings about property recently.

It is evident that the media are propelling the resurgent property boom in Australia (e.g. falsely inflated migrant numbers) as this is in the interests of protecting the baby boomers and their nest eggs. The government are also in cahoots with this as it is the best vote winner Australia has seen post WWII and most Australians wealth is tied up in their homes - if the value of your house goes up you feel like you have more money and you vote the same party back in.

However, Labor being more visionary in the political field realise that every bubble does burst and with the rest of the world's property correcting things are getting a bit out of whack in Aus. The importance of property to the economy means that any crash will take out the country and the nature of market forces means this is a real danger.

How can property prices be corrected? I have just heard from a source in Canberra that the govt is discussing releasing areas of land in and near the main capitals very cheaply with a view to kick starting the all important building industry. The price of buying land and constructing houses in these new land releases will be a long way south of average home prices of 600k and 520k in Sydney and Melbourne. This in turn will start sending prices down as spanking new homes at a lower price than the existing ones will cause this revaluation.

food for thought ...(UB40)

[proud2beaussie]

Labor being more visionary in the political field

The only "vision" that politicians of any persuasion ever have is the vision of their bank balance.
Anyone who believes that the changes that have been made to the migration program this year have anything to do with the long term interests of the country as against the short term appeasment of the union movement is seriously blinkered.
The changes were designed to appease the union movement in the face of the credit crunch and rising unemployment-nothing more,nothing less.

[Mucky Waters]

I think it will be a few years till Oz is back on its feet to be honest and Immigration will suffer.

[SimonB]

Nigel you want to look at the history of Australian politics i.e. Keating reforms and Whitlam introducing medicare - both labour governments.

Although, I am not partisan and my post was on the property boom not migration.

[proud2beaussie]

Nigel you want to look at the history of Australian politics i.e. Keating reforms and Whitlam introducing medicare - both labour governments.

Although, I am not partisan and my post was on the property boom not migration.

The title of the post is The Australian economy and its effect on migration policy.therefore my comment is perfectly on topic.