Chart of the Day: Labour supply shock to put a floor under wage cost

As the government continues to streamline foreign workers.

According to a report by Morgan Stanley Research, non-resident population growth has slowed from the teens territory seen in 2007-08 to 2.9% YoY in 2014. To the extent to which aggressive immigration policy lifted labour inputs and drove growth before, a slowdown in the working age population would slow down potential growth.

An aging population and a need to wean the economy from dependence on foreign labour, given infrastructure/political constraints mean that policymakers have undertaken steps to slow the growth of foreign labour.

Morgan Stanley adds that meanwhile, tight labour market conditions together with policy measures to streamline foreign labour amid an aging population are likely to put a floor to wage costs and core inflation.