March 16, 2009 / 8:00 AM / in 8 years

Australia slashes immigration as recession looms

CANBERRA (Reuters) - Australia will cut its intake of migrants for the first time in a decade, the government said on Monday, amid concern that skilled foreign workers could stoke resentment by taking jobs at a time of rising unemployment.

With a recession looming and the center-left government expecting unemployment to reach 7 percent by mid-2010, Immigration Minister Chris Evans said the intake of skilled migrants would be reduced by about 14 percent.

Australia goes to the polls in late 2010 and immigration has been a charged issue in past polls, particularly following economic downturn.

A leading migration expert, former government official Bob Kinnaird, said record recent migrant arrivals in a fast shrinking job market were leading to "highly combustible" conditions in regional areas, where many new arrivals had settled.

Australia is a nation of immigrants and has been enjoying a boom in new arrivals for the past decade to help meet labor shortages as a China-fueled mining boom drove unemployment rates to 30-year lows.

But six of Australia's major trading partners are now in recession and economic growth has stalled. The country moved a step closer to recession this month with the first contraction in eight years and the economy shrinking by 0.5 percent.

Australia's jobless rate spiked to 5.2 percent from 4.8 percent last month with the biggest impact felt by full-time workers. Some economists fear unemployment levels could go as high as 10 percent.

Evans said the immigration intake next year would be cut to 115,000, from 133,500 in 2008-09.

"MADNESS REIGNS"

In major resource states Queensland and Western Australia, retrenched mine workers returning to their home towns found that jobs there had been filled by foreign workers, sparking resentment, Kinnaird said.

"You could say in those last few months that madness has reigned," he told the Brisbane Times newspaper.

The ruling Labor Party, with its roots in the workers' movement, should have acted sooner to cut migration as economic conditions cooled to lance any voter backlash and ease tensions in critical country voting areas, he said.

But the Australian Chamber of Commerce and Industry said the government needed to be wary of tinkering with immigration, as many skilled employment areas still faced a worker shortage and lack of workers could crimp an economic recovery.

"We would have preferred a status quo position," chamber Chief Executive Peter Anderson said.

Evans, who removed hairdressers and cooks off Australia's critical occupation shortage list at Christmas, said he was now also deleting foreign bricklayers, plumbers, carpenters and electricians from the list that guides skilled migration intake.

Further cuts were likely in the May 12 budget, he said, leaving only health occupations, engineering and information technology skills as needed skills.

"What we'll look to do is run a smaller program and keep the capacity to make sure we can bring in any labor we might need as the year develops," Evans said.

The government hopes its recently announced A$42 billion ($27.5 billion) stimulus package, including cash handouts and infrastructure spending, will help the economy through the downturn.

($1=A$1.53)

Editing by Jeremy Laurence

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