Immigration, economic growth and unemployment in Australia, 1972-2007

In spite of the fact that their ageing populations, low birth rates, and resentment to take low paid jobs make developed countries more and more reliant on guest workers and migrants, many people in the rich world are still unconvinced about the necessity and long-term benefits of immigration, partly because these benefits are difficult to measure and do not necessarily apply to everybody. In fact, the popular belief is that immigration fuels unemployment and slows down economic growth in per capita terms. The link between immigration, economic growth and unemployment is multifaceted and this paper focuses only on a slim slice of it. Namely, it aims at testing for Granger causality between immigration, economic growth and unemployment in Australia from 1972 to 2007 in a vector autoregression framework. Although this sample period is reasonable long compared to similar studies, it is relatively short by historical scale. Yet, its advantage is that apart from the first year it coincides with the current period of post 'White Australia' immigration policy.