The World This Year

Photo Source: eastasiaforum.org
   NIAS Course on Global Politics
National Institute of Advanced Studies (NIAS)
Indian Institute of Science Campus, Bangalore
For any further information or to subscribe to GP alerts send an email to subachandran@nias.res.in

CWA # 1179, 31 December 2023
The World This Year
Australia in 2023: Challenges of Economy, Employment and Immigration

  Sayani Rana
Sayani Rana is an undergraduate student at the Department of International Relations, Peace, and Public Policy, St Joseph's University, Bangalore.

Major Developments in 2023
On 14 December 2023, the Australian Bureau of Statistics announced the unemployment rate was 3.9 per cent in November, the highest in the last 18 months. Although 61500 jobs were created in November to address the issue of unemployment, increasing the rate of participation by 0.2 per cent, the number of unemployed has further increased by 18,800 since October. The 2023 report of Skills Priority Lists indicates a labour shortage in 36 per cent of the occupations listed in Australia, the highest being in health services, engineering, and Information, Communication, and Technology roles. The November report on unemployment further adds to the claims that Australia lacks high-skilled workers while the remaining population competes for jobs in sectors requiring low skills.  

For the Australian economy, 2023 has been peculiar. The inflation rate in Australia has reduced from 7.8 per cent in FY2022Q4 to 5.4 per cent in FY2023Q4, with the average inflation remaining at 5.8 per cent for the year 2023. On 6 November 2023, the RBA hiked the interest rate by 0.25 points to a 12-year high rate of 4.35 per cent to further reduce inflation. Although the November statement of the RBA predicts that consumer price inflation will decline gradually, it will take till December 2025 to reach the 2-3 per cent target set by the RBA. Meanwhile, in the June quarter, Australia also entered a technical recession phase despite having a quarter-to-quarter GDP growth of 0.4 per cent. This occurred due to the increasing immigration into the country, which inflated its total population and struck the struggling Australian economy. Australia's GDP growth slowed by 2.1 per cent in FY2023Q2, compared to 3.7 per cent in FY2022Q2. Hence, as the net population jumped, the GDP per capita declined by 0.3 per cent for the second consecutive quarter, pushing Australia to a technical "per capita' recession. 

On 09 May 2023, the Government of Australia announced its latest migration policy, which would tackle the issue of skill shortage and stagnant participation rate. However, on 11 December 2023, as the Albanese government introduced the 2023-2024 Migration Programme, the primary objective of the policy changed to reducing immigration by 50 per cent to return it to its pre-pandemic levels. PM Albanese addressed the existing immigration policy as a 'broken system' before restricting the eligibility for student visas. As per the new policy, low-skilled workers will also find it increasingly difficult to enter the country, whereas admission for skilled workers will be streamlined. The path to citizenship will also be eased for skilled workers to address Australia's constant shortage in the high-skilled job sectors.  

On immigration, Australia witnessed an influx. According to Dr Aude Bernard, a demographer at the University of Queensland, the influx comprises individuals who would have eventually entered the country but could not due to the global pandemic and closed borders. As Australia re-opened its international borders in 2022, it paved the way for the current case of inflated immigration. The migration policy fails to consider the country's ageing population and reduced birth rate. The country's total fertility rate in 2022 is 1.63, well below the optimum rate of 2.1. According to a 2023 Australian Institute of Health and Welfare report, only 61 out of 1000 women are interested in childbirth. Hence, immigration is an appropriate solution to artificially improve the Australian demography, a strategy sabotaged by the new migration policy. 

On Australia's labour market in 2023, as indicated by the Skills priority list, skill shortage has increased by 5 per cent compared to last year, meaning the increasing difficulty of the country in filling the vacancies. The issue lies in the lack of public interest in joining the high-skilled sectors - a problem left unaddressed by the Australian government. The almost stagnant participation rate further confirms the issue, indicating the failure of the government to encourage people to join the workforce. A shortage of skilled workers hurts the Australian economy. According to the 2023 survey conducted by the Australia Industry Group, almost 90 per cent of businesses are expected to suffer a loss due to the staffing shortage. This problem, which could have been resolved with further investment in training and education, increasing remuneration and incentives, and improving working conditions, is now being addressed through the Skills-in-Demand Visa. The success of the new visa scheme cannot be guaranteed, as the 2022 CEO survey reported only 44 per cent of businesses are willing to employ skilled migrants. The government of Australia failed to address the root cause of the labour shortage in the country before bringing up a band-aid solution such as the new Migration policy. Earlier, reports produced by the Australian Bureau of Statistics predicted the country's unemployment rate to increase to four per cent; however, based on the new developments, the rate is more likely to decrease. As the migration policy aims to limit the entrance of low-skilled and unskilled labourers, Australian citizens are expected to fill those vacancies. Yet, the looming problem of skill shortage is likely to remain unresolved. 

2024: Looking Ahead
First, the unemployment rate will likely decrease, whereas it will take the RBA longer to reach its targeted bandwidth for inflation. Further, the skill shortage in the Australian labour market is also expected to increase. In its November 2023 reports, RBA predicted reaching its set inflation range of 2-3 per cent by the end of 2025. Similarly, the ABS forecasted the unemployment rate to increase to four per cent in 2024. However, due to the current circumstances, these reports will be revised.

Second, in 2024, the economic health can be expected to deteriorate with increasing inflation, skyrocketing interest rates, and a weaker Australian Dollar. This will further impact the forex reserve of the RBA, making trade much more difficult. In 2022, Australia imported goods over USD 289 billion. As the exchange rate of ASD compared to the USD continues to increase, Australia is expected to lose more of its currency while trading.

Third, there is a challenge ahead in the education sector, Australia's largest service industry. The revenue helps improve the living standards of Australians. Hence, as the number of International Students entering the country decreases in 2024, so will the revenue generated by the sector. On 23 November 2023, India and Australia held a 2+2 ministerial dialogue where representatives from both countries decided to cooperate in the education sector. 

Fourth, a decline in the bilateral relations between Australia and its neighbours in the Indo-Pacific in 2024. Countries like China, India, Japan, and South Korea hold a significant share of the immigrant workers entering the Australian job market. Most of the international students entering Australia are also from these countries. Hence, the new migration policy toughening the conditions for citizens of these countries from entering Australia will create friction in their bilateral interactions. The spillover effect of these can also be expected in their trading relations as these very countries are among Australia's largest trading partners. 

About the author
Sayani Rana is an undergraduate student at the Department of International Relations, Peace, and Public Policy, St Joseph's University, Bangalore.

Print Bookmark

PREVIOUS COMMENTS

The World This Year
December 2023 | CWA # 1189

Hoimi Mukherjee | Hoimi Mukherjee is an Assistant Professor at the Department of Political Science in Bankura Zilla Saradamani Mahila Mahavidyapith.

Chile in 2023: Crises of Constitutionality
The World This Year
December 2023 | CWA # 1187

Aprajita Kashyap | Aprajita Kashyap is a faculty of Latin American Studies, School of International Studies at the Jawaharlal Nehru University New Delhi.

Haiti in 2023: The Humanitarian Crisis
The World This Year
December 2023 | CWA # 1185

Binod Khanal | Binod Khanal is a Doctoral candidate at the Centre for European Studies, School of International Studies, JNU, New Delhi.

The Baltic: Energy, Russia, NATO and China
The World This Year
December 2023 | CWA # 1183

Padmashree Anandhan | Padmashree Anandhan is a Research Associate at the School of Conflict and Security Studies, National Institute of Advanced Studies, Bangaluru.

Germany in 2023: Defence, Economy and Energy Triangle
The World This Year
December 2023 | CWA # 1178

​​​​​​​Ashok Alex Luke | Ashok Alex Luke is an Assistant Professor at the Department of Political Science at CMS College, Kottayam.

China and South Asia in 2023: Advantage Beijing?
The World This Year
December 2023 | CWA # 1177

Annem Naga Bindhu Madhuri | Annem Naga Bindhu Madhuri is a postgraduate student at the Department of Defence and Strategic Studies at the University of Madras, Chennai.

China and East Asia
2022: The World This Year
December 2022 | CWA # 879

Padmashree Anandhan

The Ukraine War
The World This Week: 150th Issue
December 2021 | CWA # 630

GP Team

Europe in 2021