Activity 12(i)

1.  Migration adds to the supply of labour and therefore increases both the quantity (e.g. more labour) and quality of human capital (e.g. greater labour productivity via skilled migration)in the economy, which increases the ability businesses at businesses to supply goods and services as productivity increases and average labour costs fall. In relation to aggregate demand, migration necessarily results in greater consumption (e.g.migrants requiring food, clothing and housing supplies) and investment (e.g. Migrants build houses and investing in businesses)

2. The permanent immigration program was changed from a cap of 190,000 permanent visas granted to 160,000 permanent visas granted. In addition, the 160,000 permanent migrants for future programs needed to include new regional visa categories (25,000) that required immigrants to reside in regional areas for up to three years. The changes were designed to address concerns that centred around immigration numbers being too high in city areas, where infrastructure investment had not kept pace with growth size of the populations (e.g. creating congestion concerns and an acceleration in resource depletion).

3. The new regional visas should help lo reduce congestion and overpopulation metropolitan areas and also help to reduce the labour shorlage is experienced regional areas (e.g. the shortage of doctors in rural Australia). Given that skilled migrants would be forced to reside in those regional areas experiencing skills shortages, it results in an increased availability of skilled workers, which should address the skills shortages and alleviate capacity constraints in the economy.

4. The closure of Australian borders to prevent the spread of the virus understandably resulted in a huge decrease in immigration, well below the 160,000 person cap.

5. With a complete closure of the borders from March 2020, this will reduce the growth in the labour supply relative to that in the past. Indeed, given the normal retirements from Australia’s labour force every year, the absence of immigration is likely to mean that the labour supply will actually fall. This should lead to an increase in the price of labour (e.g. wages) and a reduction in employment aver time as businesses tend to substitute away from labour and into relatively cheaper capital (e.g. machinery/robotics).

6. A higher price of labour is likely to increase costs of production and negatively impact on the ability to achieve a strong rate ot economic growth (e.g. 3%+) and one that is more sustainable overtime (c.g. onc without inflation). This is because the higher cost of production adds to inflationary pressure (e.g.the AS curve shifts to the left) reducing Australia’s (international) competitiveness causing aggregate demand and economic growth to be lower than otherwise.