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Free trade in labour

By David Leyonhjelm - posted Monday, 19 March 2018

A country with a generous public health, education and welfare system, such as Australia, would be quickly swamped if it were to allow unrestricted free trade in labour. Tens of millions of people in other countries would love the opportunity to work in Australia, or benefit from our welfare system if work could not be found.

We are not alone in recognising this; there is no country in the world with a policy of complete free trade in labour. That said, we do have partial free trade in labour. There are no barriers preventing Australians from working in New Zealand, or New Zealanders working in Australia, for example. If there is a job that interests us, and the salary is acceptable, we are free to move and take the job. The same is true within the European Union; a citizen of a member country is free to take a job in any other EU country.

However, there is an important difference. New Zealanders in Australia are only eligible for the dole for six months and only if they’ve lived here for a decade. In the EU, those who move to another country are eligible for that country’s welfare benefits, a level of generosity that has provoked considerable antagonism and was a major contributor to the success of the Brexit referendum in the UK.


Our labour free trade deal with New Zealand has served Australia well. Our sheep would never be shorn without Kiwi shearers and our mining industry during the boom would have needed thousands more 457 visa holders but for New Zealanders filling the many vacancies. Many Australians, particularly managers, have filled positions in New Zealand too.

Australia would benefit enormously from similar free labour agreements with other countries with which we have equivalent standards of living and liberal democratic institutions. Countries such as the Netherlands, Sweden, Ireland, Japan and the UK come to mind. Australians would appreciate the ability to live and work in these countries, opening up a wide range of job opportunities and the potential to learn new skills, while their citizens could enjoy the same in Australia. There is also potential for considerable industry integration due to easier movement of people back and forth. 

Such agreements would not necessarily result in any permanent change in our population. While plenty of New Zealanders have moved to Australia during downturns in their country, quite a few returned when things improved. Equally, plenty of Australians have lived and worked in New Zealand for limited periods.

Bilateral free-migration agreements would also have no electoral impact because the people from these countries could not vote in our election. While we should offer a path to citizenship for those who want to make Australia their permanent home and who have integrated into Australian society, a bilateral free-migration agreement need not provide a shortcut to citizenship.

Moreover, a bilateral free-migration agreement need not provide any access to public health, education or welfare.  Where Australia provides New Zealanders with access to public health and welfare, this is the result of separate reciprocal agreements.

The benefits of bilateral free-migration agreements become clear when compared with the granting each year of hundreds of thousands of visas providing permanent residency. Holders of permanent resident visas, for example, become eligible for Medicare immediately and for income support (eg the dole) after two years. If they arrive as a family reunion immigrant rather than a skilled migrant, there is a good chance their use of health services and access to income support means they will become a net cost to taxpayers. 


We should give priority to skilled migrants rather than family reunions, limit welfare to citizens, and charge tariffs for permanent residence which are scaled according to the migrant’s potential economic contribution or cost. The tariff could even take into account the migrant’s impact on the amenity of incumbent Australians (and therefore a higher tariff would be imposed on migrants settling in Sydney and Melbourne). 

But none of that changes the fact that there is a huge opportunity to increase the pool of labour for Australian employers, and to expand job options for Australian workers, by pursuing free trade in labour on a bilateral basis.  It’s an idea whose time has come.

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This article was first published in the Australian Financial Review.

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About the Author

David Leyonhjelm is a former Senator for the Liberal Democrats.

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