22 Asia
Labour shortages
Hostel to fortune
SYDNEY
Australia needs foreign backpackers
to come back
A siAN countries blessed with natural
beauty, sunshine and copious local
beer sometimes consider backpackers a
curse—unwashed, promiscuous cheap-
skates who party too hard and spend too
little. Not Australia. Backpackers spend
time enjoying its white sands and oceans
of booze, true. But they also work to fund
their travel, providing the country with a
steady supply of cheap, low-skilled labour.
Before Australia sealed itself off at the
start of the covid-19 pandemic in 2020,
tens of thousands of backpackers flocked
to the country every year. They came main-
ly from Britain, Ireland and mainland
Europe. Australia’s borders reopened in
February, but the backpackers are nowhere
to be seen. That is causing problems across
the country. The number of temporarily
resident “working holiday-makers”, as
visa-holders allowed to do both are known,
plunged from 141,000 at the end of 2019 to
44,000 in July (see chart).
As a result, not only do pubs, restau-
rants and hotels have fewer patrons; they
are running short of staff, too. Bars strug-
gle to serve customers. Hotels have closed
rooms for lack of cleaners. “We don’t get
Australians applying for this work,” says
Liam Ganley, a publican in Melbourne who
has been so desperate for staff that he of-
fered to pay for people to migrate from
Britain and Ireland. Two of his group’s four
venues have cut their opening hours be-
cause he cannot fill his roster.
Nor is the labour shortage restricted to
big, sexy cities. It hits remote corners of
the country, too. Backpackers normally fill
jobs in sparsely populated resort towns as
they follow the tourist trail along the Great
Barrier Reef. They are allowed to extend
their stay if they spend time picking fruit
and vegetables on farms (though some
work in poor conditions, for less than the
minimum wage). Before the pandemic,
backpackers supplied Australia with 80%
of its seasonal farm labour. When they left
it created a shortfall of 26,000 harvesters.
Some farmers have had to leave crops rot-
ting in their fields.
Australia is struggling to find skilled
workers, too. Covid restrictions are not the
only reason for that. The government
pumped up the economy with fiscal stimu-
lus during the pandemic. Its unemploy-
ment rate has plunged by almost two per-
centage points since covid emerged, to
3.5%, the lowest in nearly half a century.


Trade and subsidies
Packed up
Australia, working holiday-maker visa holders
’000
180
150
120
90
60
30
0 an carmaker, promised President Joe Biden
2012 14 16 18 20 22
Source: Department of Home Affairs
Some half a million positions are sitting
unfilled—more than the number of out-of-
work Australians. Among members of the
OECD, a club of mostly rich countries, only
Canada is suffering worse labour short-
ages. But the border closure also means
that Australia has emerged from the pan-
demic with 500,000 fewer migrant work-
ers than it would otherwise have had, reck-
ons cEDA, a think-tank in Melbourne.
The new Labor government, elected in
May, wants immigrants of all stripes to re-
turn. On September 2nd Anthony Alba-
nese, the prime minister, said that he
would increase the intake of skilled mi-
grants, including nurses and engineers, by
more than a fifth, to 195,000 a year. Yet
visa-processing has been held up by ad-
ministrative backlogs. Nearly 1m applica-
tions are awaiting approval. To speed up
the process Mr Albanese has promised
A$36m ($24m) to the home affairs depart-
ment, which handles visas, so that it can
recruit some 500 more staff.
Plans of this sort would cause a back-
lash in many rich countries. But Australia
has had high immigration rates for years
without much grumbling. Nevertheless,
Mr Albanese’s efforts will do little to plug
the shortage of less-skilled temporary mi-
grants such as backpackers. (Foreign stu-
dents, another big source of casual labour,
have also yet to return in their old num-
bers.) There is no cap on how many such
workers are allowed in, so employers can
only sit and wait.
They worry that Australia no longer
looks as appealing to youngsters. Back-
packers still fear being caught out by
abruptly closed borders or cast into lock-
down, they argue. “We are talking about
lasting damage that will take years to re-
pair,” says Nick Lester of Captain Cook
Cruises, which gives tours of Sydney’s har-
bour, and is scraping by with about a third
of its normal staff. It will take until 2024
for net overseas migration to claw its way
back to pre-pandemic levels, CEDA pre-
dicts. For Australia’s stricken businesses,
that is an awfully long time. 
The Economist October 1st 2022
Electric storm
SEOUL
A failure of diplomacy and planning
sparks anger in South Korea
C HUNG EUI-SUN could be forgiven for
feeling betrayed. In May the chairman
of the Hyundai Motor Group, a South Kore-
that his firm would invest $10.5bn in
America, including $5.5bn for a big new
plant in Georgia, which would start pro-
ducing electric vehicles in 2025. America’s
president thanked him, saying “we will not
let you down.”
Yet let him down he did. In August Mr
Biden approved the Inflation Reduction
Act (IRA), a landmark climate and health-
care law. Among other things, it included
new standards that electric vehicles (EVs)
must meet to earn their buyer a tax credit
worth $7,500. The change is meant to en-
courage Americans to buy electric, and to
give carmakers more reason to bring their
factories and supply chains into America’s
orbit. No South Korean cars will qualify.
To get the rebate, EVs must henceforth
be assembled in Canada, Mexico or the Un-
ited States. And from January they must
meet two additional criteria, each worth
half of the $7,500. Battery components to-
talling 50% of the value of the bits and
pieces that are used to make these cars’
lithium-ion cells must also be manufac-
tured or assembled in those places. And
40% of the critical minerals used in the
battery must be sourced either from those
countries or from one with which the Unit-
ed States has a free-trade agreement. Both
requirements will get stricter over time.
Moreover, EVs using any components from
a “foreign entity of concern” such as China
or Russia will be ineligible from 2024.
Those using critical minerals from such
countries will lose out the following year.
Hyundai and its affiliate Kia account for
9% of the American EV market, the biggest
share of any automaker not called Tesla,
which commands a whopping 71%. Ford,
an American carmaker, is next with 6%. Mr
Chung is reportedly speeding up plans to
build his automobiles on American soil.
But until the cars start rolling out of fac-
tories, local rivals eligible for big subsidies
will have an advantage.
The battery requirements are the bigger
problem. China produces three-quarters of
the world’s lithium-ion batteries and is in-
volved in the mining, processing or refin-
ing of half the cobalt, graphite and lithium
crucial to battery production. It is likely to
continue making the lion’s share of the
world’s lithium-ion batteries until at least