Australia’s Border Reopening: Labour Market Impacts

As of February 21, the government announced that Australia’s border reopening for double vaccinated travellers, a move that followed the recently lifted restrictions for skilled migrants and international students. This landmark decision comes after the borders had been closed to attempt to prevent the spread of COVID-19 since March 2020. The re-opening is part of the government’s intention to bring 200,000 migrant workers into the country by July, to rebuild capacity in the labour market.

After two years of economic turmoil, which saw the Australian travel and tourism industries, hospitality, and agriculture, among others, struggle with labour shortages and tightened conditions, what can we expect the impact of this re-opening to be?

Economic debates about the impact of the closed border

There is no doubt that Australia saw some remarkable economic statistics over the last two years. However, there is no broad consensus about the drivers and causes of such changes. During COVID-19, Australia’s unemployment rate fell to 4.2%, marking a fourteen-year low. And while some researchers, analysts, and government representatives claim this record low is due to a lack of employment competition coming in from migrants or students as a result of the closed border, many experts, including researchers at the Grattan Institute, claim this is a misinterpretation and that the Reserve Bank’s economic management is responsible for the change.

Rather than closed borders making it easier for Australians to get jobs, thereby reducing unemployment, they claim that more significant factors include Australians not leaving the country. Furthermore, it has been identified that migrants do not typically steal jobs from Australians but rather compete for existing jobs and consume goods and services. Whichever side of the analysis you believe, re-opening the border will bring significant economic changes, including:

1. A surge in tourism industries

Industries including tourism and hospitality have been among the most impacted by closed borders, and the re-opening will prompt a wave of travel and demand. Overall, more people in the country means more spending, more consumers, and an economic reboot. This will be counterbalanced by Australians leaving the country again, as their lockdown was a primary driver of boosted GDP with closed borders.

1. Restaffing

With the re-entry of flexible workers, students, backpackers, and more, businesses in hospitality industries like restaurants will see a potential end to the staffing crisis that has defined the past two years, allowing levels to potentially return to those from pre-pandemic.

1. Increased wages

Researchers have found that adding additional migrants to the economy has the potential to boost the wages of working Australians as migrants’ entry into low-skill jobs increases the promotions of Australians into higher-paying jobs.

1. Re-balancing

According to the Grattan Institute, Australians travelling out of the country spend more abroad every year than the government makes from its incoming tourists. So, it won’t be a one-way economic boost since Australians are likely to re-ignite their travel habits which take away from spending at home, at the same time as the country welcomes a new wave of tourists and migrants.

What will this mean for your business?

It’s clear that Australia’s border reopening will have impacts beyond simply a return to “normal”. For an analysis of what this might mean for your business, contact us.