Amanda Vanstone might be gone from the ministry, but you should thank her when the Reserve Bank leaves interest rates unchanged next week.

Alternatively, you could blame her for suppressing wages and interfering with the labor market to such an extent that the laws of supply and demand are not being allowed to most efficiently allocate scarce Australian worker resources.

The AFR’s Andrew Burrell reports BHP Billiton has become the latest major applicant for mass section 457 visas, seeking 200 guest workers for its Pilbara iron ore expansion. Some 3000 guest workers were imported for the total mining sector last financial year, double the previous year’s intake.

And the signs are there will be a sharp jump again this year – but the miners represent only a fraction of the people importers. Burrell says nearly 40,000 temporary work visas were issued last year, but a Monash paper shows 37,000 457 visas were granted back in 2001.

A quick squiz on deadline at DIAC’s (nee DIMA’s) budget statements show 37,410 “sponsored business (long stay) onshore applications (persons) finalised” and 45,575 “sponsored business (long stay) offshore applications (persons) finalised” last year.

Whatever way the numbers are counted, they add up to a significant method for preventing wages growth. The employers and government maintain the guest workers are paid just wages and not exploited (except, of course, when the tabloids demonstrate they are not), but the award wage paid to an imported third-world worker has the effect of keeping down wages over all.

When one sector of the economy booms and can afford to pay more for resources, the market mechanism is supposed to sought that out. The worker driving a cane harvester for average money is enticed by a higher wage to drive a machine in an open-cut mine instead. If the sugar cane industry can’t afford to employ drivers, it is obviously a less productive use of our resources.

And there is another angle to this. The resources boom isn’t new anymore – BHP has known about it for years. The very long lead times it has for major projects include plenty of time to train new workers, to let the market mechanism work and attract labor from less productive uses elsewhere in the economy.

But BHP has been failed to do that, resulting in massive cost blowouts on its projects. It’s so much cheaper and easier just to bring in a couple of hundred people from the Third World who will be very glad to receive the existing award wages, becoming a subtle cap on labor costs.

And that keeps wages inflation down which allows the RBA to leave interest rates unchanged. Maybe the RBA owes Amanda a seat on its board.

Peter Fray

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