‘Right-sizing’ the workforce and retaining migrant talent
The dial is shifting on employment – December 2023 saw the largest monthly decline in employment since September 2021.
The 2023 calendar year saw strong job gains, with an additional 381,000 Australians employed, translating to almost 32,000 people per month.
However, the dial did shift in the last months of the year.
This week’s release of Deloitte Access Economics quarterly Employment Forecasts showed that 65,100 people became unemployed in December 2023 - the largest monthly decline since September 2021 (when the labour market was disrupted by ongoing pandemic lockdowns).
Deloitte’s latest CFO Survey also found some employers are actively taking steps to ‘right size’ their workforces given subdued economic conditions.
Two thirds of 2023’s job gains came in the first half of the year, a boost partly explained by population growth. Australia’s population grew by 2.4% in the year to the June quarter of 2023, spurred on by record overseas arrivals and historically low departures. Indeed, over the year to June 2023, we saw net overseas migration of 518,100 people, the largest annual increase on record.
Part of that strong migration growth was a post-COVID rebound. In that context, and in response to the much-anticipated Review of the Migration System, the Federal Government’s migration strategy, released in 2023, aims to put downward pressure on net overseas migration.
Government forecasts in the 2023-24 Mid-Year Economic and Fiscal Outlook (MYEFO) point to a return to lower, nearer pre-pandemic volumes of 375,000 in 2024 and 250,000 by 2025 (less than half the June 2023 levels). If the reduction in temporary migration were to materialise, it would likely help to alleviate some of the supply-side pressures that have contributed to a range of issues, and including one of the country’s biggest challenges in deteriorating rental and housing affordability.
As skills shortages persist in key industries, Australia’s migration program will still remain core to the country’s economic development. But the system needs reform, having become overly reliant on temporary visa streams. As Chart 1 illustrates, the increase in temporary visa holders and temporary residents is driving growth.
Chart 1: Temporary visa holders in Australia
Source: Department of Home Affairs Temporary Entrant Visa Holders, Deloitte Access Economics
The migration strategy acknowledges the role migration plays alongside our education, skills, and training systems in responding to labour and skills shortfalls – and includes actions to better calibrate the intake of skilled migrants to align to current and anticipated skills needs (rather than relying on dated occupation lists) and to give international student temporary graduate visa holders working in skilled jobs faster and clearer pathways to permanent residency.
Not all actions in the strategy, however, are directly targeted at tightening the intake. Some aim to strengthen the settlement experience for newly arrived migrant groups and the communities they join – drawing on success stories in Australia’s regions. The strategy also identifies an opportunity to strengthen social cohesion through a better-managed system – including infrastructure and planning supports – to build more public confidence in the migration system and enable migrants to participate in Australian life more fully.
In combination, actions in the strategy are designed to strengthen Australia’s economy, through efforts to attract and retain migrants and locally educated international graduates, and build diverse, resilient and globally connected local workforces.
This newsletter was distributed on 22 February 2024. For any questions/comments on this week's newsletter, please contact our authors:
This blog was co-authored by Rachel Power, Manager at Deloitte Access Economics.
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