The unemployment rate in Australia is historically low. There are an estimated 480,000 open jobs in Australia at the moment.
This situation is the result of several contributing factors: two years of immigration freeze during COVID, a resultant – and persistent – skills shortage, and worker discontent.
But there are signs this situation will shift in 2023.
So… what’s driving Australia’s historically low unemployment rate? We’re going to explore the job market now that we’re well into the final quarter of calendar 2022.
Unemployment Rate and Immigration
The fall in net migration during the two years of COVID border closures and lockdowns in Australia has contributed to our low unemployment rate. With hundreds of thousands of migrants unable to come to Australia over this period, labour shortages are still being felt in many sectors across the country.
In Australia, migrants play a critical role in supplementing the national supply of labour. This is because:
68% of new migrants to Australia, immediately commence employment upon arrival. They have a median age of 26, and typically stay in the workforce for several decades
69% of migrants hold a tertiary qualification upon arrival here. Another 35% obtain a tertiary qualification after arriving. For migrants arriving on a skilled visa, the tertiary qualification rate is an impressive 86%
A higher proportion of recent migrants (70%) are in the workforce than people born in Australia (65%). This is very telling. Recent migrants (76%) are also more likely to be employed full-time than Australian-born residents (68%).
Economic analysis from the Australian Industry Group shed light on the impact of border closures, on Australia’s workforce. When the recession hit in early 2020 – that is, when COVID first landed here – the Australian workforce shrank due to layoffs and lockdowns.
Then, as the economy recovered in late 2021, all these jobs were recreated. At this point, unemployment levels returned to normal. But there was a major issue. With several hundred thousand migrants missing, our labour force couldn’t recover.
What ensued was what the Australian Industry Group call a ‘labour force gap’; the difference between the actual workforce in Australia and the workforce that would be expected based on past trends. This is one of the key reasons for our current labour shortage and low unemployment rate.
Unemployment Rate and Skills
According to a National Skills Commission report, Australia is facing a staggering skills shortage across several sectors and job types. The number of occupations struggling to fill positions has jumped from 153 to 286 throughout 2022. This means, almost one-third of Australian sectors are facing a serious shortfall of workers.
In this job market, anyone would think it’s an employee’s dream. However, with rising inflation, and ongoing cost of living pressures amidst interest rates that don’t look to be easing soon, Australia’s workers aren’t in a particularly upbeat mindset.
They’re quiet quitting.
They’re not experiencing wage growth. So, their earnings are worth less, every year.
And they are dissatisfied with the world of work. They want flexible, worker-centric opportunities to make their professional lives more rewarding and engaging.
Another factor related to worker discontent is the sickness we’ve experienced in Australia during winter. According to the ABC, some economists have noted that increased staff absences due to COVID illness have pushed the unemployment rate lower.
Unemployment Rate and the 2023 Outlook
As we edge towards a new year, the unemployment rate is set to rise in 2023, according to KPMG. Their estimations are for unemployment to reach 4.5% next year. Factors such as rising inflation, higher interest rates and wage growth stagnation will result in the loss of an estimated 150,000 jobs by the end of 2023.
Others believe a 1% rise in the unemployment rate next year, is optimistic. According to macrobusiness.com.au, this is because:
The Reserve Bank’s aggressive approach to monetary policy
The expectation of record immigration to Australia in 2023
On the second point, after the new Labor Government’s recent Jobs & Skills Summit, it was announced the government would embark on the largest immigration program in Australia’s history. With a mission to boost permanent and temporary migration by record numbers, the Albanese government announced measures including:
Lifting the permanent non-humanitarian migrant intake by 35,000 to a record high of 195,000
Increasing temporary migration levels by:
Expanding the ability to work for international students via:
Uncapping the number of hours international students can work while studying for another 12 months
Extending the length of post-study work visas by two years.
Committing to clear the ‘backlog’ of “nearly one million” visas awaiting approval.
Australia’s unemployment rate and skills shortage is set to change in the new year. We only hope the swing towards meeting the market’s skills needs doesn’t move too far in the other direction, where a surplus of talent in the marketplace can’t find work. Remains to be seen.