Skilled migration key to economic recovery: RBA governor

Australia’s population growth is forecast to shrink to the lowest rate since 1916 – and an influx of skilled migrant workers is the key to fixing the economy.

Australia needs an influx of skilled migrant workers to get the economy powering again after the coronavirus pandemic, the Reserve Bank says.

Speaking at a forum on Monday night, RBA governor Philip Lowe said Australia would have to look offshore to fill jobs due to the major slump in domestic population growth caused by hard international border closures, which could stay until at least the end of 2021.

Australia’s population growth over the past 20 years has grown at an average of 1.5 per cent. But due to the health crisis, population growth is expected to shrink to 0.2 per cent over the next year – the lowest rate since 1916.

“The fast population growth of recent decades has been a major factor shaping our economy,” Dr Lowe said in his speech to the Committee for Economic Development of Australia.

“It has underpinned our relatively fast growth in GDP (gross domestic product) compared with other advanced economies.”

Reserve Bank of Australia governor Philip Lowe said addressing unemployment was an important national priority. Picture: Joel Carrett/AAP

Dr Lowe said wage growth and price pressures would remain subdued while unemployment was above 6 per cent.

“It does, though, seem highly probable that one of the marks the pandemic will leave is an extended period of higher unemployment than we have become used to. Addressing this is an important national priority,” Dr Lowe said.

Over the next two years, the RBA expects annual wages growth to be less than 2 per cent, primarily due to subdued inflation levels.

After the Reserve Bank’s decision to cut the official interest rate to an all-time low of 0.1 per cent earlier this month, Dr Lowe said the central bank would not put up rates until inflation was within its target range of 2 to 3 per cent.

“For this to occur, wages growth would have to be materially higher than recent levels,” minutes for the November 3 board meeting published on Tuesday read.

“This would require significant gains in employment and a return to a tight labour market.”

Inflation is expected to track at 1 per cent for at least the next three years.

The minutes showed members agreed interest rates would almost certainly not be lowered further, having been reduced “as far as it made sense to do so in the current environment”.

“They considered that there was little to be gained from short-term interest rates moving into negative territory and continued to view a negative policy rate as extraordinarily unlikely,” the minutes read.