Reserve Bank governor Phil Lowe says Australia’s closed international borders are having a huge impact on the labour market.
He said since employers could not “tap global labour markets” for workers like they used to, before the pandemic, Australia was starting to see pockets of wage increases in the economy.
“What used to happen before the pandemic is if there was a shortage in the labour market for a particular skill, firms could go overseas and tap the global labour market,” Dr Lowe said.
“That meant that if there was very strong demand for workers with a particular skill, the price, the wage, didn’t really move very much because you could go and get workers overseas.”
Dr Lowe said Australia’s level of immigration wasn’t necessarily the issue at the moment, it was the inability of employers to import workers from overseas to fill roles where there are labour shortages.
Dr Lowe said many firms were even trying to hold out until borders reopened.
“Firms are saying ‘well we don’t want to bid up the cost base now, because perhaps towards the end of the year there’ll be a way to get workers to come back in with skills that we really need’,” he said.
If that didn’t happen, he added, and borders were still closed a year from now, we would see more upward pressure on wages and inflation.
“It’s one of the uncertainties,” he said.