Weekly economic briefing: Australia and migration – exploring recent trends

The Weekly Economic Briefing is written by two senior Deloitte Economists, David Rumbens from Deloitte Access Economics in Australia and Ian Stewart Deloitte’s Chief Economist in the UK. They provide a personal view on topical financial and economic issues. Subscribe to receive the Weekly Economic Briefing in your inbox!

In this week’s blog:

Australian economic briefing
UK economic briefing
International economic briefing

Australian economic briefing by David Rumbens

This section of the briefing provides a snapshot of key economic data and issues of relevance to Australia.

Australia and migration – exploring recent trends

Recent rapid population growth, and the related congestion and affordability problems afflicting Sydney and Melbourne in particular has sparked debate around the size of Australia’s population – and it’s a debate that might heat up once the ABS releases its latest set of population projections in coming months.

While Australia’s population growth is driven by a combination of the existing size and structure of the population, as well as births and deaths (often referred to as natural increase), it’s net overseas migration (NOM) that typically attracts the most attention. However, as demographers like to point out, there’s no such thing as a net migrant.

While NOM is currently at the upper end of what we’ve seen historically – 262,500 in 2017 – it hasn’t yet reached the pre-GFC peak of around 300,000 in 2009. Looking at the underlying flows however, the number of NOM arrivals is the highest on record – 538,800 in 2017, driven by a record number of long-term visitors. And on the other side of the equation, NOM departures are at their lowest level since 2013, and were 276,300 in 2017.

Figure 1: NOM arrivals and departures, by visa type

Source: Australian Bureau of Statistics, Deloitte Access Economics

While the number of people arriving with temporary visas has climbed rapidly over recent years, this isn’t yet being offset by a rise in departures. But this rise can’t be too far away. Temporary visitors only have two options at the end of their visa: apply to stay permanently or move elsewhere. With the permanent migration program capped at an annual figure of 190,000 (unchanged since 2011), this leaves a large backlog of temporary visa holders – predominantly students, working holidaymakers and visitors – who will soon be departing Australia (and the official population count).

In NSW, Premier Gladys Berejiklian recently called for the State’s migrant intake to be halved. It’s worth noting that of the 93,000 people added to the NSW population via overseas migration in 2017, nearly four in five were via a temporary entry visa. Halving the State’s migrant intake would have significant implications for these visa categories (students, working holidaymakers and visitors), with impacts likely to be concentrated on the education, tourism and hospitality sectors. Higher education institutions, and associated infrastructure such as student accommodation, would be significantly affected by the cut.

Importantly, international education exports are a big contributor to the NSW economy, and a part of the migration flow that can’t be easily turned off and then on again. Were Australia to clamp down on international student arrivals, other major destinations (such as current competitors including Canada, UK and the US, as well as education within Asia itself) would stand to gain.

A further complication is the lagged nature of departures, something we’ve already highlighted above. Any cut to the migrant intake via policy would theoretically be targeted towards those arriving in the country (via the issuing of fewer visas). Slowing down that flow of new arrivals at a time when departures are likely to start increasing, may well lead to dialling down the migrant intake to lower levels than expected – compounding the economic implications.


For more information on the Australian brief, please contact co-authors David Rumbens and Ellouise Roberts.

UK economic briefing by Ian Stewart

A personal view from Ian Stewart, Deloitte’s Chief Economist in the UK. Subscribe to and view previous Monday Briefings at: http://blogs.deloitte.co.uk/mondaybriefing/

Five features of Britain’s jobs market

  1. The UK is running out of workers. At 4.0% the unemployment rate is at the lowest level since the early 1970s. This is below the rate in historically low-unemployment countries including Sweden, Denmark and Canada. A record 832,000 jobs are unfilled in the UK (two of them in the economics team). The attrition rate, the rate at which people change jobs, has shot up to its highest level since records began in 2001.
  2. Wage pressures are rising. Employers are reporting recruitment difficulties and shortages of skilled staff. The Bank of England’s chief economist, Andy Haldane, recently said there is “compelling evidence of a new dawn breaking for pay growth”. Average earnings are growing at an annual rate of over 3%, the fastest pace since the financial crisis.
  3. Employment growth has been driven by older workers, those born overseas, the self-employed and women. Total UK employment has risen by 10% in the last ten years, a remarkable achievement in the teeth of a deep financial crisis. Over the same period employment among the over-65s has risen 88%, for people born outside the UK by 54%, for the self-employed by 24% and for women by 12%. But after more than ten years of rapid growth the UK’s overseas workforce has shrunk in the last year. Brexit is having an effect.
  4. Worries about the quality of work are rising, but the picture is nuanced. Alternative forms of work have boomed in recent years, with sharp increases in the numbers of people on ‘zero hours’ contracts and working for agencies. (Agency workers are contracting via an agency to provide temporary labour to employers). Self-employment is the main category of alternative work, accounting for 5 million jobs, roughly one in six of the workforce. Terms including ‘precariat’ and the ‘gig economy’ have been used to describe a world of unstable, lower skilled and lower paid work with little chance of progression. This is a real phenomenon, one which partly reflects growth in lower productivity sectors such as hospitality. Yet alternative forms of working suit many people, especially those wanting to combine work with study or family commitments. Some two thirds of zero hours workers are content with the number of hours they work. (Although about a third, around 300,000 people, want to work longer). The typical self-employed person earns less than someone in employment but is also happier and more engaged with their work. And the great majority of people working in temporary or part-time roles, around 95%, do so out of choice, not because they are unable to find a full-time job. A flexible labour market has given the UK an enviable record of job creation, high levels of employment and high female workforce participation. Curbing alternative forms of work would involve trade-offs, most of all the risk of reducing job creation.
  5. The flip side of the UK’s stellar record on job creation is a stagnation in productivity growth. In the decades before the financial crisis labour productivity, the efficiency with which labour is used, rose by over 2.0% a year. In the last 10 years productivity has virtually stagnated. This partly reflects a shift from high to low-productivity industries. For instance, employment in high-productivity manufacturing has fallen 10% since 2006 while the number of jobs in accommodation and food sector, where productivity is far lower, has risen by 35%. If wages pressures continue to build businesses will come under growing pressure to boost productivity, perhaps through changing the organisation of work, investment or improving training. Labour shortages and higher wages are also likely to constrain the employment growth in lower productivity sectors.

PS – Last week The City UK released a report on the UK’s role as an international financial centre. The report contains some amazing statistics, including that the UK’s trade surplus in financial and related professional services is estimated to be £83bn in 2017, more than the next three largest surpluses (the US, Switzerland and Luxembourg) combined. The report also states that twice as many dollars are traded in the UK as in the US and twice as many Euros are traded in the UK as in the Euro area.


The FTSE 100 ended the week down 1.4% at 6,940 as global stock markets suffered their fifth consecutive week of declines, the longest losing streak for five years as concerns over global trade and economic growth weigh on markets.

International economic briefing by Ian Stewart

Economics and business

  • The US economy expanded by 3.5% in the third quarter, beating expectations, as consumption rose by its fastest pace in nearly four years
  • In a sign that robust US economic growth is impacting the country’s labour market, earnings rose at 3.5% in September, the fastest pace in nine years
  • In a rare sign of weakness in an otherwise strong economy, US new home sales fell to a two-year low in September
  • Janet Yellen, former chairman of the US Federal Reserve, warned of the “huge deterioration” in corporate lending standards in the US
  • In a move that highlighted the clash between national sovereignty and the demands of a single currency, the EU rejected the Italian government’s plan to run a sizeable budget deficit to boost the economy
  • The European Central Bank (ECB) confirmed that it will end its monthly purchase of €15bn of government bonds at the end of this year
  • The ECB president Mario Draghi said he remains confident in the euro area’s “broad-based economic expansion”
  • UK manufacturing orders fell at the fastest pace in three years in the third quarter as fears over a disorderly Brexit impacted confidence
  • UK car production fell 16.8% in September from a year earlier
  • The UK gender pay gap fell to 8.6% in the year to April, its lowest level on record
  • The biggest agricultural commodities traders agreed to work together to digitise contracts, invoices and other paperwork

Brexit and European politics

  • The Times reports that civil servants have begun contingency planning for a second referendum in the event that the Brexit deal is voted down in Parliament
  • UK MPs will be presented with a large volume of legislation in mid-November under no-deal contingency plans to mitigate the effects of a no-deal outcome
  • The Bank of England are testing whether UK banks have “sufficient liquidity to accommodate a severe dislocation in financial markets” in the event of a no-deal Brexit
  • Donald Tusk, the president of the European Council, said the EU would accept an extension of the Brexit transition period if “it helps reach a deal”
  • The National Audit Office warned that work to prepare UK borders for a no-deal Brexit are “at risk of not being delivered on time and to acceptable quality”

And finally…

  • Wildlife officials in India’s western state of Maharashtra have bought bottles of the men’s perfume ‘Obsession’ by Calvin Klein to try and catch a tiger which has killed 13 people. The authorities hope the fragrance, which contains a pheromone derived from a cat-like mammal, can lure the tiger in which has evaded capture for two years – fatal attraction

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