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Australia's stalled migrant boom derails golden economic run

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Australia's stalled migrant boom derails golden economic run

By Swati Pandey and Sam Holmes

 

2020-05-31T230900Z_2_LYNXMPEG4U0SH_RTROPTP_3_HEALTH-CORONAVIRUS-AUSTRALIA-IMMIGRATION.JPG

Gurmeet Tuli, who owns a jewellery shop speaks with fellow small business owners at an Indian restaurant, where a business has substantially slowed since the onset of the coronavirus disease (COVID-19) outbreak, in the Parramatta suburb of western Sydney, Australia, May 29, 2020. REUTERS/Loren Elliott

 

SYDNEY (Reuters) - Australia's three decades of uninterrupted prosperity are coming to an abrupt end as the global coronavirus pandemic crashes one of its most lucrative sources of income – immigration.

 

The country has been successful in managing the outbreak and reopening its A$2 trillion ($1.33 trillion) economy, thanks in part to an early closure of its borders.

 

But the policy has led to a halt in mass immigration - a key source of consumer demand, labour and growth - in an economy which is facing its first recession since the early 1990s.

 

Net immigration, including international students and those on skilled worker visas, is expected to fall 85% in the fiscal year to June 2021, curbing demand for everything from cars and property to education and wedding rings.

 

Gurmeet Tuli, who owns a jewellery store in the Sydney suburb of Parramatta, said his business is already hurting in a neighbourhood which is home to tens of thousands of migrants.

 

"My main clientele is young people who come here to study, they find work here and settle down, fall in love and want to get married," Tuli said.

"I have not sold a single diamond ring in the past two months," he added, noting business is down about 40% so far this year.

 

So critical is migration to Australia that analysts reckon the economy would have slipped into a recession last year without new arrivals to boost population growth.

 

AMP Capital Chief Economist Shane Oliver estimates that population growth in recent years has boosted the economy by about one percentage point per year.

 

But as migration stalls, education, housing and tourism sectors are seen among the worst hit.

 

The drought in international student arrivals, who in recent years made up about 40% of the migrant intake, is expected to hit the A$37 billion education sector, Australia's second largest services export after tourism.

 

A fall in new arrivals could also dampen the construction boom in Australia's all important housing sector, which has been fuelled by migrants in big cities like Sydney and Melbourne.

 

"REAL IMPACT"

Even though immigration is a politically divisive topic in Australia, there is a broad recognition that the country needs its 200,000 to 300,000 annual intake to grow consumption demand and fill skills shortages in various sectors.

 

While a large share of these migrants arrive on what are considered "temporary" visas, many later gain permanent residency and employment, adding to long-term population growth.

 

Australia's population would grow an average 1.6% annually over the decade to 2027, according to the latest official projections from 2018. Without immigration, it was forecast to grow only 0.5%.

 

"During a slowdown and when the unemployment rate is high there is popular pressure to slow down migration," said AMP Capital's Oliver. "But if we want the economy working back again, we need migration to return."

 

Concerns over immigration range from sustainability and housing affordability to more populist complaints about social integration and foreigners taking local jobs.

 

Prime Minister Scott Morrison said last week Australia needed 160,000 to 210,000 arrivals to sustain GDP per capita growth, and acknowledged the great uncertainty current restrictions cast over the outlook.

 

"It's going to be one of the real impacts of this crisis because our borders aren't opening anytime soon," he said.

 

SAFE BUBBLE

That has prompted urgent calls for solutions from some businesses and political leaders.

 

The premier of New South Wales, Gladys Berejiklian, is lobbying her federal counterparts to allow international students in to rescue universities, which contribute A$13 billion to the economy of the country's most populous state.

 

Australia's government is also working with New Zealand to establish a "Trans-Tasman bubble" that would re-open the movement of people between the two closely integrated economies.

 

New Zealand is a large source of labour for Australia, home to about 600,000 kiwi expatriates.

 

To be sure, Australia still enjoys its "lucky country" status, benefiting from resilient global demand for some commodities and having been able to re-open large parts of the economy sooner than many other advanced economies.

 

But even though Australia's central bank expects the economy to expand 6% next year after a projected 6% contraction in 2020, analysts and businesses warn a sustained recovery is unlikely without the full resumption of immigration.Over the years, immigration has helped transform Australia's retail and urban landscape, reviving down-at-heel suburban high streets, spurring swanky commercial property development and creating new consumer markets.

 

Gotcha Fresh Tea is one of a host of bubble tea franchises that has expanded rapidly in Australia, with demand fuelled in large part by international students but also by growing interest for the Asian tapioca beverage from the wider community.

 

Orlando Sanpo, business development manager at EFC Group Australia, the chain's franchisor, said the student freeze has hit sales by up to 80% in some downtown stores and even closed an outlet at a Sydney campus.

 

"We need people to come back to the country," Sanpo said.

 

(Editing by Ana Nicolaci da Costa)

 

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-- © Copyright Reuters 2020-06-01
 
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57 minutes ago, Andrew65 said:

Australia recorded a government debt equivalent to 45.10 percent of the country's Gross Domestic Product in 2019. (Source: Trading Economics).

Still very low in comparison with many others

Thanks for the correction. As you pointed out, still low. For example, Germany's debt in relation to GDP was about 57%.

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8 hours ago, Peterw42 said:

I would hate to see what a recession looks like in Australia, given that a 30 year boom economy has resulted in a $600 Billion debt, a currency that is worth nothing, a country that doesn't manufacture anything (not even white-goods) and the worlds biggest real estate pyramid scheme.

 

Something is fundamentally wrong if the country needs migration to feed the pyramid scheme. 

It has worked beautifully for me throughout the whole of my adult life. Good-to-booming economy most of the time, and cultural enrichment from large migrant intakes and from comfortably-off Aussies travelling the globe.

 

Government debt has been low till the current pandemic when the federal government has pumped cash enthusiastically into the economy. Predictions are that it will take decades to pay off. Personally I doubt it. More boom times to follow as immigration, foreign uni students and the mining industry pick up (the latter already going strong). And - contrary to the public image - a number of booming high-tech & service industries, including small naval vessels exported to the US from W.A. and Atlassian software that has turned its 2 young developers into multi-billionaires.

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11 hours ago, webfact said:

Australia's stalled migrant boom derails golden economic run

Why does Australia need so mane Immigrants? Not to fill Jobs? Look at this:

 More than 800,000 people are unemployed in Australia, or 6.2% of the population, according to April data from Trading Economics. This is the highest rate of joblessness since 2015, however, the unemployment rate has not yet reached the expected mark of 8.3%.5 days ago

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Posted (edited)

You have to question the immigration rate for "skilled" workers. AUS has some of the best universities and Tech colleges so there should be no shortage of required labour. But many or the universities courses are not about teaching service and manufacturing skills.

The student university intake is purely to prop up the incoming foreign exchange and real estate in the capital cities. The biggest unit developer in Sydney has been targeting these for the the last 15 years as he almost went out the back door in the early 2000's. Most of their sales were to foreign parents of students and the NSW government loved the taxes on the transactions.

Edited by GreasyFingers
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9 minutes ago, GreasyFingers said:

You have to question the immigration rate for "skilled" workers. AUS has some of the best universities and Tech colleges so there should be no shortage of required labour. But many or the universities courses are not about teaching service and manufacturing skills.

The student university intake is purely to prop up the incoming foreign exchange and real estate in the capital cities. The biggest unit developer in Sydney has been targeting these for the the last 15 years as he almost went out the back door in the early 2000's. Most of their sales were to foreign parents of students and the NSW government loved the taxes on the transactions.

Many well qualified Australians head overseas for better paid jobs and more opportunities. Overseas students are the third largest export earner in Australia at $37 plus billion dollars, but going to be hammered this year by Covid. Without migration, as mentioned in the OP, Australia's population growth would only be 0.5% which is unsustainable for economic growth. From memory a developed Western country requires a population growth at a minimum of around 1.6% p.a. to sustain economic growth.

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4 minutes ago, simple1 said:

Many well qualified Australians head overseas for better paid jobs and more opportunities. Overseas students are the third largest export earner in Australia at $37 plus billion dollars, but going to be hammered this year by Covid. Without migration, as mentioned in the OP, Australia's population growth would only be 0.5% which is unsustainable for economic growth. From memory a developed Western country requires a population growth at a minimum of around 1.6% p.a. to sustain economic growth.

It's true what you say, but I think it's also the 'elephant in the room', the real problem that the world faces is population growth, a cause of, and more of a problem than climate change.

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8 minutes ago, simple1 said:

 From memory a developed Western country requires a population growth at a minimum of around 1.6% p.a. to sustain economic growth.

Not so, For most of the 21st century China's population growth rate has been about .5%. Since 1960 Germany's population growth rate has never reached 1% and much of the time has actually been negative. USA hasn't reached that rate since the early 60's. In fact most of the ecomony developed nations have had growth rates well below that figure for the latter part of the 20th century and through what there is of the 21st.

And keep in mind that the GDP growth rate in question here is an aggregate. The relevant GDP figure for quality of life is not that for a country as a whole but per capita.

 

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4 minutes ago, johnpetersen said:

Not so, For most of the 21st century China's population growth rate has been about .5%. Since 1960 Germany's population growth rate has never reached 1% and much of the time has actually been negative. USA hasn't reached that rate since the early 60's. In fact most of the ecomony developed nations have had growth rates well below that figure for the latter part of the 20th century and through what there is of the 21st.

And keep in mind that the GDP growth rate in question here is an aggregate. The relevant GDP figure for quality of life is not that for a country as a whole but per capita.

 

I did say Western countries. Just had a look at Germany, looks like my memory was incorrect, should I have instead talked to childbirth rates as having a major impact on the economy (plus ageing population which is a real problem in Oz). Apologies for any confusion...

 

For many years, it was a generally accepted fact that the German population was going to fall. The Federal Statistical Office and the Federal Institute for Population Research pointed to continually low birth rates and not enough immigration as the reasons for this development. If birth rates remained constant at 1.4 children per woman and immigration at 100,000 people per year, by 2060 Germany would no longer be home to around 80 million people - the figure would have fallen to around 68 million.

https://www.dw.com/en/germany-is-not-shrinking/a-37415327

 

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