Temporary and permanent skilled migration vital for future growth says IMF

by Ray Clancy on September 26, 2012

in Australia Immigration

Australia needs to be flexible in terms of labour market mobility, say IMF

With some sectors in Australia voicing concerns about the economic and jobs outlook those considering moving there to live and work can take heart from the latest assessment from the International Monetary Fund.

The IMF says in its report that flexibility in the workforce will help Australia to ride out other global economic blips as will embracing opportunities with emerging Asian countries.

Temporary and permanent skilled migration will be vital so that workers can move across regions and industries, it adds.

The report, published after a visit by a team of IMF officials, points out that the increasing share of the mining sector in the economy implies that Australia will be exposed more to volatile commodity prices, not only upward but also downward as in recent months.

‘The floating exchange rate may offset some of the effects of this volatility, along with the counter cyclical operation of fiscal policy allowed in the current medium term fiscal strategy, but it offers little help in terms of mitigating asymmetric effects on different industries and regions within the country,’ it warns.

To combat this Australia needs to remain flexible in terms of labour market mobility and flexibility, so that workers can smoothly move across industries/regions and the use of by temporary and permanent skilled migration.

‘Their ability to do so will again be tested when investment in the resources sector comes off its peak and some labour currently employed there is to be absorbed by the rest of the economy,’ it says.

The IMF praised the Australian government’s strategy for dealing with the economy’s longer term structural transition, in particular making the most of the opportunities offered by the growth of Asian economies.

‘To benefit from the Asian Century, Australia needs more than a mining sector success, not least to ensure that the economy has diversified enough growth drivers. Asia’s globalization and integration already have several decades of history, and thus, finding low hanging fruits in terms of market penetration might not be easy for Australia,’ the report says.

‘Strong efforts, especially on the part of business leaders, to become Asia conscious would be required to discover opportunities in the region. The government has a role to play in creating an environment conducive for Australian firms to cultivate their Asian markets,’ it adds.

The report also shows that the Australian economy has been growing faster than most advanced countries with GDP growth accelerating from 2.5% in the second half of 2011 to 4% in the first half of 2012, driven by growth in private domestic demand and exports.

The IMF says that investment, in particular mining related construction, expanded strongly and consumer spending grew in line with solid household income growth.

It also says that labour market has performed well in international comparison, but employment growth has recently slowed although the remains favourable.

But Australia, like everywhere else, will not be immune to the risk of financial and economic fallout from an intensification of the European debt crisis and a hard landing in emerging Asia, especially China, possibly compounded by a sharp decline in commodity prices. A slowdown in China could reduce demand for Australian mineral exports, worsen terms of trade, reduce household income, and could trigger a fall in house prices.

‘This could in turn weaken consumer demand and growth, and negatively affect banks’ balance sheets. However, we consider this type of risk escalation to be a relatively low probability event,’ it explains.

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