Immigration-unemployment relationship: evidence from five Australian states

Immigration to Australia has contributed around 50 per cent of population growth over the last twenty years. The economic consequences of immigration are of great concern not only for policy-makers but also for local workers. Using a system of equations for real gross state product, real wage, immigration rate and unemployment rate for five Australian states (New South Wales, Queensland, Victoria, South Australia and Western Australia), this study suggests that the economic impacts of immigration varies by states and by estimation methods. This study finds that immigrants are not displacing locals’ jobs. In the long-run, this study reveals significant negative relationships between immigration and unemployment in New South Wales, Victoria and Western Australia. The short-run error correction models reveal when the unemployment rate of NSW and VIC exceeds the long-run equilibrium level, they would readjust to equilibrium with approximately 12.84 per cent and 27 per cent respectively in the current period. For WA, the long-run decreasing trend of unemployment attracts immigrants. In general, immigration contributes to the permanent expansion of the Australian economy and reduces the unemployment rate.