Deloitte Access Economics points to the economic boost migration has provided Australia throughout the century, hinting at concerns that changes to migration policy will have a detrimental effect on the jobs market.
This mirrors fears from those servicing the SME community about caps on skilled migration, put forward by the Liberal Party in this month’s federal budget.
“While much of what passes for national debate focuses on traffic congestion and on fears of losing jobs to educated foreigners, Australia has surged through this century thanks to the boost that migration has provided to our job market,” Deloitte said.
‘Slowdown bites, but not hard’
Global economic conditions are slow, and that together with a falling housing market in Australia, have kept key growth indicators at home below trend.
For Deloitte, growth will stay in this below-trend pattern for the rest of 2019.
Typically, slowing growth has a knock-on impact on business confidence and consumer spending, but Deloitte doesn’t foresee a major catastrophe ahead.
“With house prices falling fast, consumers have become more conservative. And there’ll be fewer new homes being built, especially apartments. But don’t get carried away: this is a slowdown rather than something deeper and nastier,” Deloitte’s latest report said.
“Although house price falls are hurting the economy, there are limits to that, partly because price falls are deepest where economies are strongest (in Sydney and Melbourne). Besides, prices rose so fast in the first place that shoppers never got too excited with their new-found wealth; meaning, they aren’t pulling in their horns too deeply into the downturn either.
“However, slowdown it is. In addition, that weaker growth will mean slower job gains, and it may also see the recovery in wages — already slower than a wet week — slip sideways for a while.”
‘A big fat nothing’
Other key indicators of a healthy economy, like inflation, are also not producing stellar numbers — and there’s more of the same, if not worse, on the horizon.
“There’s more of the same in store for inflation: a big, fat nothing. With oil prices having dropped, the Australian economy having slowed, and with wage growth barely breaking a sweat, Deloitte Access Economics sees headline and underlying inflation — presently a little under 2 per cent — easing even further,” Deloitte said.
“Price pressures may lift a little once again through the course of 2020–21 as some of the dampeners of the moment become less drab: as oil prices steady, as economic growth navigates the house price crash of the moment, and as wage growth eventually resumes its painful climb upwards.”
Despite the uninspiring predictions, Deloitte believes there’s no reason to panic.
“The Reserve Bank has nothing to fear from inflation, and it doesn’t look like having to be scared any time soon. And the main reason why inflation isn’t going anywhere is because wage gains aren’t going anywhere either,” Deloitte said.
In a speech this week, governor of the central bank Guy Debelle presented the RBA’s assessment of Australia’s current economic situation.
He made particular mention of the tension between the differing states of GDP, labour and business conditions.
While Australia’s GDP has been weak, the labour market has been strong, with the unemployment rate declining faster than the RBA had previously forecast.
“The two lenses on economic growth provided by the labour market and the GDP data are in stark contrast,” Mr Debelle said.
“A third lens, in the form of business surveys, sits in between the two. Business conditions have declined from their high levels on the first half of 2018 but still remain consistent with around-trend growth in the economy.”