September 23, 2024 • 18 mins
New Zealand is a country of immigrants, with tens of thousands of people moving here each year.
We’re also a country of travellers, and those new arrivals help make up for the population shortfall as Kiwis migrate overseas.
Due to the stream of migrants in recent years, our population has been steadily growing, but new forecasts from one economist predicts net migration may slow to zero by 2025.
So if the number of new arrivals is even with the number of long-term departures, what impact will that have on our economic growth?
Today on The Front Page, we’re joined by Westpac senior economist Michael Gordon, to discuss his immigration projections, alongside NZ Herald business editor at large Liam Dann.
Follow The Front Page on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.
You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
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Sound Engineer: Paddy Fox
Producer: Ethan Sills
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Kyota. I'm Susie ordqwitzt and for Chelsea Daniels. And this
is the Front Page, a daily podcast presented by the
New Zealand Herald. New Zealand is a country of immigrants,
with tens of thousands of people moving here each year.
We are also a country of travelers, and those new
(00:25):
arrivals help make up for the population shortfall as Kiwi's
migrate overseas. Due to the stream of migrants in recent years,
our population has been steadily growing, but new forecasts from
one economist predicts net migration may slow to zero by
twenty twenty five. So if the number of new arrivals
(00:46):
is even with the number of long term departures, what
impact will that have on our economic growth? Today on
the Front Page, we are joined by Westpac Senior economist
Michael Gordon to discuss his immigration projections alongside New Zealand
Herald Business Editor at Large Liam Dan. Michael, what are
(01:08):
your projections around immigration and New Zealand.
Speaker 2 (01:11):
Well, we're expecting it to slow actually quite a bit
from where it has come from. You may remember even
less than a year ago we were seeing net inflows
of peaked at over one hundred and thirty something thousand people.
It's now slowed to I think in the last year
about sixty seven thousand, but the monthly paces is dropping
off and we expect that to continue on further and
(01:35):
actually getting down to probably a balanced outcome really over
calendar twenty five. So within that that would imply that
at some point we're going to see some minuses come
through on the monthly numbers.
Speaker 1 (01:45):
Okay, so net zero migration effectively, what do you mean
by that.
Speaker 2 (01:49):
Well, that just means we have as many people leaving
as arriving. Now, within that balance, there tends to be
I think two big groups that drive that balance is
the foreign arrivals and then there's the departures of New Zealanders,
and they tend to go through the same kind of
cycles because they're really reflecting the economic conditions and I
(02:11):
guess especially relative economic conditions here versus Australia, because that's
a common destination for New Zealanders and it's also a
close alternative for people coming from places like India or
China or the Philippines when they're looking to move to
a richer country.
Speaker 1 (02:26):
So the number of people coming in will balance the
number of people going out. This is a pretty big call.
What led you to this?
Speaker 2 (02:33):
It's really are just a continuation of the trends we're
seeing now. So since that peak in those numbers of
over one hundred thousand people, we've seen mostly the foreign
arrivals have come off from their highs, and New Zealand
tends to have some very big cycles in those net
migration figures. Anyway. A big part of that is that
increasingly a lot of the people who arrive are not
(02:56):
so much permanent migrants, but they are considered long term,
staying here for more than a year. And it's people
that are coming on time limited visas like student visas
or work visas. A lot of them will come with
the hope that they can stay here longer term. Not
all of them will be able to, and especially if
the jobs dry up, then people who are on work visas,
you know, if they're sort of tied to assertian employer
(03:17):
and the employer is laying people off or maybe going bust,
you know, they may be forced to go home again.
I think that's probably the biggest change that we've seen
this year is there has been a really notable pick
up in the number of those recent arrivals who are
leaving again. We've got the normal cycle, but all of
this has been compounded and I guess exaggerated by COVID.
So we had a lot of people that were really
(03:38):
waiting for the border to reopen for the opportunity to
make their move. That happened in both directions, but especially
in terms of their arrivals. There was this big catch
up flow that's slowed. But also we've had a lot
of recent arrivals that may be in fairly unsecure positions
and you know, we're starting to see them leave again.
Speaker 1 (03:54):
Do you have any figures that speak to those recent
arrivals who are leaving again soon after?
Speaker 2 (04:00):
Not really. Unfortunately, we don't have a lot of visibility
over people leaving, and in large part that's because New
Zealand got rid of the departure cards in twenty eighteen.
So for instance, we're not collecting any information on what
sort of jobs they're leaving from. For instance, we do
have some information about age, we don't have a great
(04:23):
sense even of where they're going, necessarily because the information
that we get records where their flight lands. So for instance,
someone who's going to do their oe in London probably
won't be recorded as going to London. They'll be recorded
as going to Singapore or Hong Kong or something like
that where they have a layover. But in the past,
when we have had information on the kinds of people leaving,
(04:45):
we probably have more of a sense of the kiwis
that are leaving, and they tend to be a bit
of a cross section really of society. It's not necessarily
the best and brightest, it's just it tends to be
actually people who are over thirty, often with children, and
they're really moving to opportunity, so you know, perhaps they're
looking for a similar job with better pay.
Speaker 3 (05:06):
While the under twenties are eight percent better off in
New Zealand, at every other age group, the difference grows
to about twenty percent in the favor of Australia. Adding
fuel to the fire, Let's also consider that Australian employers
at eleven percent of super on top of these wages,
while in New Zealand we're get a poultry three percent. Clearly,
with the best available data from both countries' governments, Australia
(05:28):
has more money to offer kiwis of all age groups.
Speaker 1 (05:34):
Liam It wasn't that long ago we were talking about
this immigration boom, Like Michael touched on there, why this
sudden turnaround.
Speaker 4 (05:42):
Yeah, it's pretty dramatic. I mean I tend to get
a bit excited about immigration. I sourced a lot of
Michael's work. He was the first economist I saw who
picked that we were going to go through this incredible
one hundred thousand net gain, which we smashed through. But
when he made that call, people were like a bit
you know, open mouthed at the time. So, yeah, from
an incredible record number to what now looks like sort
(06:04):
of net zero is a huge turnaround. I mean, I
guess part of that is all this pent up demand
from COVID, so as Michael says, that's exaggerated. You know,
we had an outsized number of people waiting to get
in and people waiting to get out. But also I
assume a lot of it is just jobs in the economy.
So we know that the New Zealand economy, as interest
rates went up, came off really fast, and we went
(06:25):
from a labor shortage to a situation where unemployment from
sort of near record lows started to rise and is
expected to keep rising. So there really in a lot
of cases it just doesn't jobs to come to. So
that's going to immediately dampen and also create an incentive
for some people to leave.
Speaker 1 (06:42):
Is one of the factors though, that New Zealand isn't
an appealing place to live anymore.
Speaker 4 (06:46):
Well, I mean, you know that's underpin by job. So
you could talk about Christoph Luxeen and his mojo. He's
talked a lot about bringing New Zealand's mojo back and
the idea that we've sort of lost a bit of
a spot as a star in the world's view. You know,
may like our tourism hasn't come back as fast as
people would have hoped, But you know, at the end
of the day, it's a big call to move your
family or move yourself across the other side of the
(07:08):
world and set up your life and all that sort
of thing. And I think it really is underpinned by
jobs and an opportunity. So the New Zealand economy has
been through this absolute roller coaster as well, and so
you're sort of seeing that reflected in the migration numbers.
Speaker 1 (07:21):
Michael, do you think New Zealand's lost its mojo?
Speaker 2 (07:24):
Well, I think it's an economic cycle. We've been through
these before. It's been I think not entirely normal because
we've had this very strange disruption from COVID, and as
it has affected the economy in unusual ways, so I
think it's also had unusual impacts on the migration trends.
I mean, I think speaking more broadly about the economy,
(07:44):
you know, we've had effectively two years of GDP flat
to down slightly. If you measure that in per person terms,
it looks like it's gone back quite a bit because
we have had that quite strong population growth in the meantime.
In terms of the peak to trough fall in per
person GDP, it looks quite large. But we were coming
from a quite overheated starting point. I mean, COVID. I
(08:06):
think we're probably not going to get agreement on this point.
But COVID was really mainly a disruption to how we
do business. If someone described it to you that way,
you'd say our GDP should have fallen when COVID hit,
and it didn't actually rocketed away once we came out
of lockdown, And that was really just speaking to the
amount of stimulus from low interest rates and from government
(08:26):
spending that was really you know, turbo charging the economy.
At a time we were facing this effectively big capacity constraint.
So you know, we've come from this very overheated starting point.
Some of that was necessary. I don't know if you
can really truly say where the economy would be now
if we'd never had COVID, because so many other things
would have been different. But I suspect we are probably
to some degree, you know, coming back to where the
(08:49):
trend of where we would have been without COVID.
Speaker 1 (08:50):
Anyway, this must be a worry though, because immigration is
critical to our country success, right.
Speaker 2 (08:56):
I don't know. I mean I take maybe a more
neutral view of migration than the average person. I mean,
I think migration, firstly, just some degree is a vote
of confidence in our economy. You know, both in terms
of people who want to come here and also you
know whether the Kiwis want to stay or try their
luck in Australia or the UK or whatever. I mean.
People they move to opportunities. It tends to be what
(09:18):
drives it. So there's the relative appeal of New Zealand's
a relatively rich country, but not as rich as Australia.
But you also get cycles driving it as well, So
I think there's probably actually quite a big cyclical aspect
going on, and that's coming back to that overheated economy
and that inflation fight that you know, maybe would have
panned out differently if we hadn't had the whole COVID thing.
Speaker 1 (09:49):
When was the last time we saw a loss of population?
Speaker 4 (09:52):
Over the long period of New Zealand's history, we've bounced
in and out of net migration gains and net migration losses.
I do know that we had a long period between
nineteen seventy six and nineteen ninety two, which was a
really rough time for our economy. We were in and
out of recession a lot. We had a lot of
on average, i'd say, a net migration loss across that period.
(10:12):
There was some big net migration losses across that period,
and that's when we coined the term brain drain and
Rob muldoon made a funny joke about raising the intelligence
of both countries when people went to Australia, which wasn't
really funny because we were losing people. And I accept
that per capita GDP is an important measure, but I'm
seeing a lot of people using it at the moment
in a way to suggest that things are really terrible,
(10:34):
and actually it will resolve itself because we won't have
people coming in. And that period where we didn't have
population gain was actually worse for New Zealand because we
were facing recessions and also struggling with you know, not
enough people to buy things, you know, prop up the economy.
Speaker 1 (10:50):
Speaking about people, the average person on the street, Michael,
how could net zero migration impact them. I'm thinking in
terms of the housing market, employment, things like car sales.
Speaker 2 (11:02):
I think for the average person, they may not actually
notice it a lot. It's one of these funny things
where I mean, if you think about migration booms, they
add to both demand and supply in the economy, but
you often only hear about one leg or the other.
And I think that's maybe just a reflection of you know,
which voices get prioritized. So a couple of years back,
(11:23):
it was really businesses, you know, screaming out about worker
shortages and rarely pushing for you know, reopening the border
and loosening up the work visa requirements and someone to
try and get more workers and so try and get
the supply side up. But I think as as an
economist and obviously but not the normal person anyway. But
I was looking at this and going, well, walking on,
(11:44):
every single employer is screaming labor shortages. It's not particular
skills that we're missing, it's just everyone does not have
enough workers to meet the amount of work they've got
on That actually sounds like an excess demand problem to me,
not a supply one. But the narrative was all about
or we don't have enough people, we don't have enough workers,
when you know, in reality, adding more people to the
country is just going to add to demand. And if
(12:07):
the problem is that demands already overheated, that's not really
fixing it. So it might be one the kind of
thing that you know, individual employers notice. It might be
a couple of years down the track when the economy
is picking up again and they may find, oh no,
actually I'm struggling to find people again. Can we bring
in some more migrants For the average person, Probably not
so much, because it's the effect kind of gets diluted
(12:29):
across just the sheer size of the population.
Speaker 1 (12:31):
Could the fallen migration fix unemployment in this country?
Speaker 2 (12:36):
In part A responds to it anyway with a bit
of a lag, But for instance, the number of New
Zealanders leaving has quite a strong relationship with the unemployment
rate difference between New Zealand and Australia, so it's just
really reflecting job prospects. So you can think about, oh,
you know, there's better pay in Australia, better wheather, et cetera.
(12:56):
But that sort of doesn't explain why there are cycles.
You know, if pay was the only consideration, then why
would anyone stay? Why would any of us still be here?
The fact is we do get cycles, and a lot
of it comes down to, I guess the relative strength
of the jobs markets here and there, and we're in
a I think relatively unusual situation where the jobs markets
softening in New Zealand is holding up fairly well in Australia,
(13:17):
so we are seeing a lot of people going over there.
You know that there are other times when, say, if
we see a global recession and you know both countries
job markets are softening, people tend to stay at home
because if you're going to be unemployed, you may as
well be unemployed in your home country. So there's a
couple of different factors going on there. But essentially, right now,
I think the strength of the Australian jobs market is
acting as a bit of a release valve for unemployment here.
(13:40):
If we didn't have that, if people for some reason
weren't allowed to leave the country, we would probably have
higher unemployment rate than we've see now.
Speaker 1 (13:47):
Homeowners are holding on for a revival in the housing market,
which is looking more likely with interest rates starting to drop.
What as almost suition now if things don't change, is
that there will be a couple of cuts this year,
and then it'll be almost like a domino. We're going
to keep seeing cuts over the next year eighteen months.
That may take the rate down to more like two
(14:08):
point seven five from the.
Speaker 2 (14:10):
Current five point five.
Speaker 1 (14:11):
So that's really good news. It's just a matter now
of it's a matter of it. It's a matter of
when is your forecast likely to threaten that revival.
Speaker 2 (14:21):
The migration forecast. I don't think so, just because a
lot of the variation in how surprices firstly comes from
interest rates. So we're now seeing a new phase in
the interest rate cycle where they are starting fall. The
effects of that will become apparent over the next year
or so ahead. Migration tends to be a little bit
subtle because you're kind of talking about small differences in
(14:43):
the population growth rate versus small differences in the rate
at which we're increasing the housing stocks. So it might be,
you know, two percent population growth plus one percent increase
in the number of houses. There's an imbalance there, but
it's a fairly subtle one and it takes a bit
of time to build up. I think with so what
we're forecasting in terms of the migration numbers, it is
(15:03):
more of a short lived cyclical thing. So when I
talked about you know, we might see some net outflows
at some point, it's not something that would really be
for a sustained period like that period in the seventies
and beyond that or even I think that probably the
last time that we really saw sustained outflows on balance
was the early twenty tens, and some of that was
(15:24):
reflecting the shock of the christi At earthquakes as well
as the state of the economy. We're talking something that's
a bit more short lived than those previous periods.
Speaker 1 (15:31):
Liam. We're being told to survive until twenty twenty five,
that things will be better next year. Will things be better?
In your view?
Speaker 4 (15:38):
I think there's a lot of expectation around lower interest rates. Yeah,
I guess I just feel that, you know, it's quite
a dramatic shift from a record high at one hundred
and thirty six thousand coming in to maybe net zero,
and it presents probably is a little bit of a headwind.
I mean, I don't think the residential housing market is
going to be massively dampened by it, but around apartments
(15:58):
and apartment construction, that may be an issue because you know,
we have actually got a bit of an oversupply of
apartments and so if you haven't got people coming in
some of those immigrant groups coming in our apartment buyers
and so couldn't have an impact there. I guess the
other issue is the extent to which the government might
move to do something to address that and opening up
immigration policy further potentially if they start to hear more
(16:22):
calls about shortages from various businesses. I've also heard the
Prime Minister recently talking about possibility of bringing back international
investors into residential property. That was a National Party policy
that didn't get through the coalition agreement because Whinston Peter's
in New Zealand a first are very much against that.
But apparently according to the Prime Minister, he's softening a
(16:42):
bit on the idea that if we have other investment
criteria tied to residential housing, they might be able to
get some agreement on allowing some international investment and residential housing. So,
you know, the Prime Minister has taught a lot about
getting more money into the country and that if it's
not people themselves moving here, if the money's coming here,
that sort of fills the app So that's sort of
something that the government of its successful in doing that,
(17:04):
could do to counter this, and then I guess that
gets the ball rolling, you know, you get the economy
rolling again, and then migration would probably pick up.
Speaker 1 (17:11):
What do you think about this idea of bringing back
foreign investors to increase immigration.
Speaker 2 (17:16):
I think it's a pretty marginal effect really. I guess
the foreign investment in housing in particular, we kind of
saw how it worked when it was implemented that probably
didn't really make a big dent in you know, what
was a pretty otherwise hot housing market at the time,
and I think that there's probably a few chains that
you have to go through for that to sort of
rarely benefit the economy. So it's one thing to sort
of bring foreign investor money in, but you need to
(17:39):
know probably actually make it easy for them to do
something with that. So that's probably still coming down to
that nagging issue about the ease of building housing. The
funding is not the constraint here. It's how easy we
ourselves choose to make it for anyone, whether they're New
Zealanders or foreigners.
Speaker 1 (17:55):
Michael and Liam, thank you. That's it for this episode
of the Front Page. You can read more about today's
stories and extensive news coverage at inz Herald dot co
dot endzet. The Front Page is produced by Ethan Sills.
Patty Fox is a sound engineer. I'm Susan Nordquist. Subscribe
(18:18):
to The Front Page on iHeartRadio or wherever you get
your podcasts, and tune in tomorrow for another look behind
the headlines.
Kyota. I'm Susie ordqwitzt and for Chelsea Daniels. And this
is the Front Page, a daily podcast presented by the
New Zealand Herald. New Zealand is a country of immigrants,
with tens of thousands of people moving here each year.
We are also a country of travelers, and those new
(00:25):
arrivals help make up for the population shortfall as Kiwi's
migrate overseas. Due to the stream of migrants in recent years,
our population has been steadily growing, but new forecasts from
one economist predicts net migration may slow to zero by
twenty twenty five. So if the number of new arrivals
(00:46):
is even with the number of long term departures, what
impact will that have on our economic growth? Today on
the Front Page, we are joined by Westpac Senior economist
Michael Gordon to discuss his immigration projections alongside New Zealand
Herald Business Editor at Large Liam Dan. Michael, what are
(01:08):
your projections around immigration and New Zealand.
Speaker 2 (01:11):
Well, we're expecting it to slow actually quite a bit
from where it has come from. You may remember even
less than a year ago we were seeing net inflows
of peaked at over one hundred and thirty something thousand people.
It's now slowed to I think in the last year
about sixty seven thousand, but the monthly paces is dropping
off and we expect that to continue on further and
(01:35):
actually getting down to probably a balanced outcome really over
calendar twenty five. So within that that would imply that
at some point we're going to see some minuses come
through on the monthly numbers.
Speaker 1 (01:45):
Okay, so net zero migration effectively, what do you mean
by that.
Speaker 2 (01:49):
Well, that just means we have as many people leaving
as arriving. Now, within that balance, there tends to be
I think two big groups that drive that balance is
the foreign arrivals and then there's the departures of New Zealanders,
and they tend to go through the same kind of
cycles because they're really reflecting the economic conditions and I
(02:11):
guess especially relative economic conditions here versus Australia, because that's
a common destination for New Zealanders and it's also a
close alternative for people coming from places like India or
China or the Philippines when they're looking to move to
a richer country.
Speaker 1 (02:26):
So the number of people coming in will balance the
number of people going out. This is a pretty big call.
What led you to this?
Speaker 2 (02:33):
It's really are just a continuation of the trends we're
seeing now. So since that peak in those numbers of
over one hundred thousand people, we've seen mostly the foreign
arrivals have come off from their highs, and New Zealand
tends to have some very big cycles in those net
migration figures. Anyway. A big part of that is that
increasingly a lot of the people who arrive are not
(02:56):
so much permanent migrants, but they are considered long term,
staying here for more than a year. And it's people
that are coming on time limited visas like student visas
or work visas. A lot of them will come with
the hope that they can stay here longer term. Not
all of them will be able to, and especially if
the jobs dry up, then people who are on work visas,
you know, if they're sort of tied to assertian employer
(03:17):
and the employer is laying people off or maybe going bust,
you know, they may be forced to go home again.
I think that's probably the biggest change that we've seen
this year is there has been a really notable pick
up in the number of those recent arrivals who are
leaving again. We've got the normal cycle, but all of
this has been compounded and I guess exaggerated by COVID.
So we had a lot of people that were really
(03:38):
waiting for the border to reopen for the opportunity to
make their move. That happened in both directions, but especially
in terms of their arrivals. There was this big catch
up flow that's slowed. But also we've had a lot
of recent arrivals that may be in fairly unsecure positions
and you know, we're starting to see them leave again.
Speaker 1 (03:54):
Do you have any figures that speak to those recent
arrivals who are leaving again soon after?
Speaker 2 (04:00):
Not really. Unfortunately, we don't have a lot of visibility
over people leaving, and in large part that's because New
Zealand got rid of the departure cards in twenty eighteen.
So for instance, we're not collecting any information on what
sort of jobs they're leaving from. For instance, we do
have some information about age, we don't have a great
(04:23):
sense even of where they're going, necessarily because the information
that we get records where their flight lands. So for instance,
someone who's going to do their oe in London probably
won't be recorded as going to London. They'll be recorded
as going to Singapore or Hong Kong or something like
that where they have a layover. But in the past,
when we have had information on the kinds of people leaving,
(04:45):
we probably have more of a sense of the kiwis
that are leaving, and they tend to be a bit
of a cross section really of society. It's not necessarily
the best and brightest, it's just it tends to be
actually people who are over thirty, often with children, and
they're really moving to opportunity, so you know, perhaps they're
looking for a similar job with better pay.
Speaker 3 (05:06):
While the under twenties are eight percent better off in
New Zealand, at every other age group, the difference grows
to about twenty percent in the favor of Australia. Adding
fuel to the fire, Let's also consider that Australian employers
at eleven percent of super on top of these wages,
while in New Zealand we're get a poultry three percent. Clearly,
with the best available data from both countries' governments, Australia
(05:28):
has more money to offer kiwis of all age groups.
Speaker 1 (05:34):
Liam It wasn't that long ago we were talking about
this immigration boom, Like Michael touched on there, why this
sudden turnaround.
Speaker 4 (05:42):
Yeah, it's pretty dramatic. I mean I tend to get
a bit excited about immigration. I sourced a lot of
Michael's work. He was the first economist I saw who
picked that we were going to go through this incredible
one hundred thousand net gain, which we smashed through. But
when he made that call, people were like a bit
you know, open mouthed at the time. So, yeah, from
an incredible record number to what now looks like sort
(06:04):
of net zero is a huge turnaround. I mean, I
guess part of that is all this pent up demand
from COVID, so as Michael says, that's exaggerated. You know,
we had an outsized number of people waiting to get
in and people waiting to get out. But also I
assume a lot of it is just jobs in the economy.
So we know that the New Zealand economy, as interest
rates went up, came off really fast, and we went
(06:25):
from a labor shortage to a situation where unemployment from
sort of near record lows started to rise and is
expected to keep rising. So there really in a lot
of cases it just doesn't jobs to come to. So
that's going to immediately dampen and also create an incentive
for some people to leave.
Speaker 1 (06:42):
Is one of the factors though, that New Zealand isn't
an appealing place to live anymore.
Speaker 4 (06:46):
Well, I mean, you know that's underpin by job. So
you could talk about Christoph Luxeen and his mojo. He's
talked a lot about bringing New Zealand's mojo back and
the idea that we've sort of lost a bit of
a spot as a star in the world's view. You know,
may like our tourism hasn't come back as fast as
people would have hoped, But you know, at the end
of the day, it's a big call to move your
family or move yourself across the other side of the
(07:08):
world and set up your life and all that sort
of thing. And I think it really is underpinned by
jobs and an opportunity. So the New Zealand economy has
been through this absolute roller coaster as well, and so
you're sort of seeing that reflected in the migration numbers.
Speaker 1 (07:21):
Michael, do you think New Zealand's lost its mojo?
Speaker 2 (07:24):
Well, I think it's an economic cycle. We've been through
these before. It's been I think not entirely normal because
we've had this very strange disruption from COVID, and as
it has affected the economy in unusual ways, so I
think it's also had unusual impacts on the migration trends.
I mean, I think speaking more broadly about the economy,
(07:44):
you know, we've had effectively two years of GDP flat
to down slightly. If you measure that in per person terms,
it looks like it's gone back quite a bit because
we have had that quite strong population growth in the meantime.
In terms of the peak to trough fall in per
person GDP, it looks quite large. But we were coming
from a quite overheated starting point. I mean, COVID. I
(08:06):
think we're probably not going to get agreement on this point.
But COVID was really mainly a disruption to how we
do business. If someone described it to you that way,
you'd say our GDP should have fallen when COVID hit,
and it didn't actually rocketed away once we came out
of lockdown, And that was really just speaking to the
amount of stimulus from low interest rates and from government
(08:26):
spending that was really you know, turbo charging the economy.
At a time we were facing this effectively big capacity constraint.
So you know, we've come from this very overheated starting point.
Some of that was necessary. I don't know if you
can really truly say where the economy would be now
if we'd never had COVID, because so many other things
would have been different. But I suspect we are probably
to some degree, you know, coming back to where the
(08:49):
trend of where we would have been without COVID.
Speaker 1 (08:50):
Anyway, this must be a worry though, because immigration is
critical to our country success, right.
Speaker 2 (08:56):
I don't know. I mean I take maybe a more
neutral view of migration than the average person. I mean,
I think migration, firstly, just some degree is a vote
of confidence in our economy. You know, both in terms
of people who want to come here and also you
know whether the Kiwis want to stay or try their
luck in Australia or the UK or whatever. I mean.
People they move to opportunities. It tends to be what
(09:18):
drives it. So there's the relative appeal of New Zealand's
a relatively rich country, but not as rich as Australia.
But you also get cycles driving it as well, So
I think there's probably actually quite a big cyclical aspect
going on, and that's coming back to that overheated economy
and that inflation fight that you know, maybe would have
panned out differently if we hadn't had the whole COVID thing.
Speaker 1 (09:49):
When was the last time we saw a loss of population?
Speaker 4 (09:52):
Over the long period of New Zealand's history, we've bounced
in and out of net migration gains and net migration losses.
I do know that we had a long period between
nineteen seventy six and nineteen ninety two, which was a
really rough time for our economy. We were in and
out of recession a lot. We had a lot of
on average, i'd say, a net migration loss across that period.
(10:12):
There was some big net migration losses across that period,
and that's when we coined the term brain drain and
Rob muldoon made a funny joke about raising the intelligence
of both countries when people went to Australia, which wasn't
really funny because we were losing people. And I accept
that per capita GDP is an important measure, but I'm
seeing a lot of people using it at the moment
in a way to suggest that things are really terrible,
(10:34):
and actually it will resolve itself because we won't have
people coming in. And that period where we didn't have
population gain was actually worse for New Zealand because we
were facing recessions and also struggling with you know, not
enough people to buy things, you know, prop up the economy.
Speaker 1 (10:50):
Speaking about people, the average person on the street, Michael,
how could net zero migration impact them. I'm thinking in
terms of the housing market, employment, things like car sales.
Speaker 2 (11:02):
I think for the average person, they may not actually
notice it a lot. It's one of these funny things
where I mean, if you think about migration booms, they
add to both demand and supply in the economy, but
you often only hear about one leg or the other.
And I think that's maybe just a reflection of you know,
which voices get prioritized. So a couple of years back,
(11:23):
it was really businesses, you know, screaming out about worker
shortages and rarely pushing for you know, reopening the border
and loosening up the work visa requirements and someone to
try and get more workers and so try and get
the supply side up. But I think as as an
economist and obviously but not the normal person anyway. But
I was looking at this and going, well, walking on,
(11:44):
every single employer is screaming labor shortages. It's not particular
skills that we're missing, it's just everyone does not have
enough workers to meet the amount of work they've got
on That actually sounds like an excess demand problem to me,
not a supply one. But the narrative was all about
or we don't have enough people, we don't have enough workers,
when you know, in reality, adding more people to the
country is just going to add to demand. And if
(12:07):
the problem is that demands already overheated, that's not really
fixing it. So it might be one the kind of
thing that you know, individual employers notice. It might be
a couple of years down the track when the economy
is picking up again and they may find, oh no,
actually I'm struggling to find people again. Can we bring
in some more migrants For the average person, Probably not
so much, because it's the effect kind of gets diluted
(12:29):
across just the sheer size of the population.
Speaker 1 (12:31):
Could the fallen migration fix unemployment in this country?
Speaker 2 (12:36):
In part A responds to it anyway with a bit
of a lag, But for instance, the number of New
Zealanders leaving has quite a strong relationship with the unemployment
rate difference between New Zealand and Australia, so it's just
really reflecting job prospects. So you can think about, oh,
you know, there's better pay in Australia, better wheather, et cetera.
(12:56):
But that sort of doesn't explain why there are cycles.
You know, if pay was the only consideration, then why
would anyone stay? Why would any of us still be here?
The fact is we do get cycles, and a lot
of it comes down to, I guess the relative strength
of the jobs markets here and there, and we're in
a I think relatively unusual situation where the jobs markets
softening in New Zealand is holding up fairly well in Australia,
(13:17):
so we are seeing a lot of people going over there.
You know that there are other times when, say, if
we see a global recession and you know both countries
job markets are softening, people tend to stay at home
because if you're going to be unemployed, you may as
well be unemployed in your home country. So there's a
couple of different factors going on there. But essentially, right now,
I think the strength of the Australian jobs market is
acting as a bit of a release valve for unemployment here.
(13:40):
If we didn't have that, if people for some reason
weren't allowed to leave the country, we would probably have
higher unemployment rate than we've see now.
Speaker 1 (13:47):
Homeowners are holding on for a revival in the housing market,
which is looking more likely with interest rates starting to drop.
What as almost suition now if things don't change, is
that there will be a couple of cuts this year,
and then it'll be almost like a domino. We're going
to keep seeing cuts over the next year eighteen months.
That may take the rate down to more like two
(14:08):
point seven five from the.
Speaker 2 (14:10):
Current five point five.
Speaker 1 (14:11):
So that's really good news. It's just a matter now
of it's a matter of it. It's a matter of
when is your forecast likely to threaten that revival.
Speaker 2 (14:21):
The migration forecast. I don't think so, just because a
lot of the variation in how surprices firstly comes from
interest rates. So we're now seeing a new phase in
the interest rate cycle where they are starting fall. The
effects of that will become apparent over the next year
or so ahead. Migration tends to be a little bit
subtle because you're kind of talking about small differences in
(14:43):
the population growth rate versus small differences in the rate
at which we're increasing the housing stocks. So it might be,
you know, two percent population growth plus one percent increase
in the number of houses. There's an imbalance there, but
it's a fairly subtle one and it takes a bit
of time to build up. I think with so what
we're forecasting in terms of the migration numbers, it is
(15:03):
more of a short lived cyclical thing. So when I
talked about you know, we might see some net outflows
at some point, it's not something that would really be
for a sustained period like that period in the seventies
and beyond that or even I think that probably the
last time that we really saw sustained outflows on balance
was the early twenty tens, and some of that was
(15:24):
reflecting the shock of the christi At earthquakes as well
as the state of the economy. We're talking something that's
a bit more short lived than those previous periods.
Speaker 1 (15:31):
Liam. We're being told to survive until twenty twenty five,
that things will be better next year. Will things be better?
In your view?
Speaker 4 (15:38):
I think there's a lot of expectation around lower interest rates. Yeah,
I guess I just feel that, you know, it's quite
a dramatic shift from a record high at one hundred
and thirty six thousand coming in to maybe net zero,
and it presents probably is a little bit of a headwind.
I mean, I don't think the residential housing market is
going to be massively dampened by it, but around apartments
(15:58):
and apartment construction, that may be an issue because you know,
we have actually got a bit of an oversupply of
apartments and so if you haven't got people coming in
some of those immigrant groups coming in our apartment buyers
and so couldn't have an impact there. I guess the
other issue is the extent to which the government might
move to do something to address that and opening up
immigration policy further potentially if they start to hear more
(16:22):
calls about shortages from various businesses. I've also heard the
Prime Minister recently talking about possibility of bringing back international
investors into residential property. That was a National Party policy
that didn't get through the coalition agreement because Whinston Peter's
in New Zealand a first are very much against that.
But apparently according to the Prime Minister, he's softening a
(16:42):
bit on the idea that if we have other investment
criteria tied to residential housing, they might be able to
get some agreement on allowing some international investment and residential housing. So,
you know, the Prime Minister has taught a lot about
getting more money into the country and that if it's
not people themselves moving here, if the money's coming here,
that sort of fills the app So that's sort of
something that the government of its successful in doing that,
(17:04):
could do to counter this, and then I guess that
gets the ball rolling, you know, you get the economy
rolling again, and then migration would probably pick up.
Speaker 1 (17:11):
What do you think about this idea of bringing back
foreign investors to increase immigration.
Speaker 2 (17:16):
I think it's a pretty marginal effect really. I guess
the foreign investment in housing in particular, we kind of
saw how it worked when it was implemented that probably
didn't really make a big dent in you know, what
was a pretty otherwise hot housing market at the time,
and I think that there's probably a few chains that
you have to go through for that to sort of
rarely benefit the economy. So it's one thing to sort
of bring foreign investor money in, but you need to
(17:39):
know probably actually make it easy for them to do
something with that. So that's probably still coming down to
that nagging issue about the ease of building housing. The
funding is not the constraint here. It's how easy we
ourselves choose to make it for anyone, whether they're New
Zealanders or foreigners.
Speaker 1 (17:55):
Michael and Liam, thank you. That's it for this episode
of the Front Page. You can read more about today's
stories and extensive news coverage at inz Herald dot co
dot endzet. The Front Page is produced by Ethan Sills.
Patty Fox is a sound engineer. I'm Susan Nordquist. Subscribe
(18:18):
to The Front Page on iHeartRadio or wherever you get
your podcasts, and tune in tomorrow for another look behind
the headlines.
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