Bulletin

Insights into the economy and financial system from teams throughout the Reserve Bank of Australia

July 2025

Australian Economy

A (Closer to) Real Time Labour Quality Index

Angelina Bruno, Jonathan Hambur and Lydia Wang

One explanation that has been put forward for weakness in productivity growth over the past few years is the entry of less experienced or less educated workers to the strong labour market. However, existing labour ‘quality’ statistics that capture such dynamics use delayed information and so can be hard to interpret in real time. To address this problem, we used microdata sources to construct a timely version of the existing labour quality statistics. In doing so, we found evidence that labour quality has actually increased strongly since the COVID-19 pandemic and supported growth in market sector productivity over recent years. While initial work suggests that standard approaches may miss some relevant dimensions of human capital, such as time outside employment, these do not appear substantive enough to overturn the main findings.

COVID-19, labour market, productivity
Australian Economy

International Students and the Australian Economy

Madeleine McCowage, Harry Stinson and Matthew Fink

International students play a significant role in the Australian economy. They contribute to demand through their spending on goods and services and are an important source of labour for some Australian businesses. This article shows that international students tend to add more to demand in the economy than they do to supply in the short run, in large part reflecting their spending on tertiary education fees. In periods of large swings in international student numbers or when the economy has little spare capacity, this means that changing international student numbers can affect macroeconomic outcomes, particularly in sectors of the economy where supply cannot respond quickly. The rapid growth in international student numbers post-pandemic likely contributed to high inflation over this period, but was not a major driver.

COVID-19, education, housing, inflation, international, labour market
Australian Economy

How Do Changes in Global Shipping Costs Affect Australian Inflation?

Vanessa Li

Australia’s experience during the COVID-19 pandemic showed that developments in international shipping can have a significant effect on domestic inflation. This is because higher global shipping costs can flow through the supply chain for imports and increase costs for Australian firms, who can in turn pass on those higher costs to consumers. This article addresses the question of when and how unexpected changes in global shipping costs have tended to pass through to Australian consumer price inflation since 2003. It finds that the pass-through to ‘shippable’ goods inflation can be material, and that shocks to global shipping costs were large enough to have contributed materially to trimmed mean inflation during the pandemic. That said, there is substantial uncertainty around the estimated pass-throughs, particularly because excluding the pandemic period leads to much smaller and less precise estimates of the pass-through to trimmed mean inflation.

COVID-19, inflation, international, modelling, trade

Some graphs in this publication were generated using Mathematica.

ISSN 1837-7211