Friday, September 10, 2010
Vital Statistics
22 Aug 2007
BERL expects net migration inflow to ease
Kel Sanderson
We usually lead into our labour market forecasts with an assessment of the labour demand and employment situation. However, the recent change of most significance is sentiment on the migration front.
We had been confidently forecasting that the overall net inflow would plateau-out at a net inflow of 15,000 to 20,000 going forward. Note that the net inflow, having reached a trough at 6,000 in the year to October 2005, had climbed to 15,000 in the year to November 2006. It appears that has all changed. In the five months from November to April the net inflow annual rate has dropped by 3,500, from 15,200 to 11,700. This decline is still a fairly small number as combined flows are over 150,000. But, this time the decline is mostly due to an increase in departures, and mostly to Australia. Departures to Australia have increased by about 3,200 a year.
The changes in migration flows reflect people’s views on the attractiveness of New Zealand as a place to live. This is the case, whether they are New Zealanders potentially leaving, or overseas migrants considering shifting here. We have generally been confident in the benign situation of the last few years. There has been a strong underlying inflow of over 40,000 per year from Europe and North America. We have been less worried than some as to the 25-30,000 leaving for Australia. Many of these are beginning their longer-term OE, where they gain experience in Melbourne, or Sydney. Thereafter they move to a higher income/higher saving situation in London, for example. Many of these subsequently return, as valuable inward migrants in the 40,000 inflow.
However, the recent and rather rapid upswing in departures to Australia is a concern, as Australia can be seen as the ‘destination of least resistance’ for restless Kiwis. Increased departures to Australia now could spread, subsequently, to an increased outflow to other countries. The reasons for the increase in departures are being canvassed in the popular press. We have no sound analysis to support any unique reason. Suffice it to say that various aspects of monetary and fiscal changes, either side of the Tasman, are more than likely to be playing their part. Sentiment to the effect of, for example, ‘why pay such high mortgage rates?’, or ‘get your money out while the NZ$ is high’, or ‘why pay higher taxes on lower wages?’ are widely reported.
One thing we do know is that, as the net inflow subsides back into a range of only about 5,000 per year, it will reduce growth in the real economy. Each net inbound household needs a house, a set of whiteware, perhaps brownware and a car, insurance services etc.
We are now forecasting net migration inflows of 5,000 to 10,000 per year for as long as the monetary brakes are applied to reduce the vibrancy in the New Zealand economy.
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