Migrants: Inflation Scapegoats or Saviours? Debunking the Mainstream Narrative

By Nick Hurley, 4th December 2023.

Recent headlines paint a stark picture: “Migrant Surge Fanning Inflation Flames!” This narrative, while convenient and easy to conceptualise without much cognitive load, risks obscuring the real economic realities surrounding skilled migration and its impact on inflation.

Firstly, the “surge” moniker deserves scrutiny. While net arrivals are indeed elevated, reaching 454,400 in the year to March 2023, they primarily represent a normalisation following pandemic-induced lows, not an unprecedented influx. Many of these ‘immigrants’ are international students who are arriving for their respective first, second and third year of university all at once.

Attributing inflation solely to migrants is akin to blaming a single raindrop for a flood. Yes, they are placing upward demand on housing and the rental component of the CPI but in most other areas of the economy their presence and labour is actually pushing prices down. Most immigrants enter Australia at working age, ready to contribute right away.

As RBA Governor Michelle Bullock said only last week, “We’ve been surprised a little bit on the strength of activity. It’s held up a little better than we thought. That’s meant that services price inflation has held up a bit more. So what we’re observing is a bit more domestic price pressures than we’d expected.”

To suggest skilled migrants are driving up service inflation ignores the interplay of complex inflationary forces.

In sectors grappling with labour shortages, skilled migrants have the potential to act as a potent inflationary antidote. Each doctor easing healthcare bottlenecks, each engineer accelerating construction projects, and each tech whiz bridging talent gaps becomes a hand on the inflation brake, not an additional foot on the accelerator.

Sectors experiencing worker shortages:

• Construction:
  • Almost half (48%) of small and medium-sized enterprises (SMEs) in construction reported labor shortages as a “very significant” issue in the fourth quarter of 2022, according to the National Australia Bank (NAB).
  • This is likely due to a combination of factors, including an aging workforce, strong demand for construction services, and a lack of skilled migrants.
• Healthcare and social assistance:
  • This sector has the highest number of job vacancies in Australia, with over 68,900 unfilled positions as of July 2022.
  • This shortage is particularly acute in aged care, nursing, and allied health professions.
• Food and accommodation:
  • Job openings in food and accommodation services have increased by 211% in 2022.

• Other sectors facing labor shortages:

  • Retail
  • Education
  • Agriculture
  • Transport and logistics

Picture hospitals operating at peak efficiency, surgeries back on schedule, and patients receiving timely care. Picture construction sites buzzing with skilled workers, infrastructure and housing projects delivered on budget and within deadlines. Picture innovation hubs flourishing unhindered by talent gaps with the right people able to get the right jobs. This isn’t a pipe dream; it’s the future skilled migration can help us build, a future where inflation is not a runaway train, but a manageable engine driving economic growth.

Of course, integrating this influx demands meticulous planning. Language support, cultural awareness programs, and streamlined pathways to residency are not mere niceties, but crucial investments in our shared future. A well-managed migration program is not a burden, but a strategic injection of the talent our economy so desperately needs.

Therefore, we need to abandon the simplistic blame game and embrace a data-driven approach. Let’s view skilled migrants not as inflationary demons, but as potential inflation-busting economic contributors. They are the builders, the carers, the innovators who can help us not just tame the inflationary beast, but ultimately build a stronger, more vibrant, and more prosperous Australia.

The choice is clear: succumb to the seductive simplicity of scapegoating or embrace the complex reality and welcome the skilled migrants who can be the fuel propelling us out of higher interest rates and into a wealthier and more productive Australia.