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Immigration challenges

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2024-01-02

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As the federal government unveils its new 10-year immigration plan, investors are advised to closely monitor how the government treats overseas tradies. This aspect of the plan has garnered significant attention due to its potential implications.

The government's immigration plan intersects with the political landscape, particularly Labor’s union influence, which seeks to make it more challenging for overseas tradies to migrate, even amid a housing construction crisis. This debate highlights a broader concern regarding immigration and its impact on the economy—a concern that investors should not ignore.

Labor’s migration reforms may be a necessary response to current challenges, but they do not mark the end of the road. According to Shehriyar Antia, head of thematic research at global funds management giant PGIM, a global competition for skilled and unskilled migrant workers is on the horizon. This competition is expected to become a significant issue for many countries grappling with rapidly aging populations.

Antia suggests that what countries need are not just "thinkers" but also "doers"—professionals such as aged care nurses, tradies, and workers skilled in fields like renewable energy and turbine maintenance. These workers are essential for the practical aspects of infrastructure and service provision, which often receive less attention than design and finance.

PGIM's research underscores the importance of understanding long-term trends in human capital. Structural mismatches between labour supply and demand are becoming increasingly evident, with over- and under-education being a notable concern. Antia points out that in Australia, for example, there is a demand for plumbers, but in Europe, there's a need for renewable energy workers. This mismatch between education and job opportunities is a global issue affecting approximately one billion workers.

Geographic labour imbalances further complicate matters. Germany currently faces a shortage of 300,000 nurses, while Brazil grapples with high nurse unemployment rates. These examples highlight the disparities in labour distribution worldwide.

Antia contends that investors should approach these mismatches on three levels: countries, sectors, and companies. At the national level, potential issues such as higher inflation and lower growth in wealthier countries with aging populations need to be considered. Developing nations with strong population growth will face different challenges. In sectors such as renewable energy, aged care, and cybersecurity, labour shortages may emerge as a concern, despite these industries' positive growth prospects. Conversely, sectors like agriculture, basic manufacturing, and administration may leverage technology, such as artificial intelligence, to reduce labour dependency and cut costs.

At the company level, Antia advises investors to evaluate firms' competitive positions carefully. While industries like energy transition and artificial intelligence may seem promising, companies that struggle to access the right skills, lack robust training programs, or fail to establish essential partnerships may face difficulties. Having the best leadership team may not suffice if a company cannot find skilled workers who can effectively execute tasks.

In summary, as the immigration debate unfolds, investors should not only consider its immediate political implications but also the broader and longer-term trends in human capital that could significantly impact economies and markets. The ability to address labour mismatches and secure the right workforce may prove to be a critical factor in a company's success in the evolving global landscape.

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