KPMG Chief Economist, Dr Brendan Rynne, comments on today’s ABS data on unemployment and population
The increase in the number of people employed – especially women employed – between January and February is very welcome, although we await the effects of the tapering off of JobKeeper support at the end of this month.
Overall, we believe the unemployment rate will stay around its new level for the next few months as the economy consolidates and handles the transition out of high levels of government support to the business sector.
We see the rise in employment accelerating thereafter such that the unemployment rate falls to around 5.2 percent in 2022. In terms of outlook this year will see a strong performance in the Australian economy, with GDP boosted by the unlocking of pent-up demand from a lockdown-affected 2020. This will be reflected in the employment figures.
In terms of population, net overseas migration was down 64.8 percent compared to the previous year, driven by a decrease in overseas migration arrivals (35.4 percent). The drop-off in international travel hits Australia particularly hard, given the relative importance of service exports to our economy, especially the benefit associated with foreign students and inbound tourism.
KPMG modelling has shown that in the absence of smooth vaccine roll-out over the next 18 months, the Australian population could be up to a million people fewer by 2030 than on pre-COVID projections. The loss of skilled younger migrants will represent a substantial hit to our GDP given that fewer working-age people would be supporting older Australians, and there would be a loss in productivity since the immigration program is deliberately tilted towards skilled migrants including university students and graduates.
Our modelling found that even a modest 40,000 additional skilled working-age migrants would boost GDP by up to $4.7bn by the end of the decade. We propose giving overseas students a clearer pathway to residency, as a means to achieving that end. Extra incentives will be needed to make them choose Australia, as in the post-COVID-19 world competition for international students will be intense, so we propose an accelerated and targeted intake program.