Mark Smith: ASB Senior Economist on the international tourism figures remaining below pre-Covid levels

International tourism continues its slow recovery to pre-Covid levels. 

Overseas visitor arrivals were at 3.23 million for the year to September, which is up on the same month last year, but well below 2019's almost 4 million. 

ASB Senior economist Mark Smith told Ryan Bridge that part of our struggle is that the global economy still recovering from Covid. 

He says the most important reason is that costs remain stubbornly high – New Zealand's a reasonably expensive destination, and airfares are still very high. 

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Episode Transcript

Speaker 1 (00:00):
Tourism numbers are out, it's not good news for the sector.
As we head into summer, we're still only hitting eighty
seven percent of our pre COVID numbers. It's more of
a merit than an excellence on an NCAA exam. You'd
have to say. Migration is also declining as a record
number of kiwis leave most of them to Australia. It's
net positive for now but reducing each month. So could

(00:21):
we be on the way to net zero migration next year?
And what does it mean? Mark Smiths, the ASP senior economists, Mark,
good morning.

Speaker 2 (00:29):
Good morning, good to hear from you.

Speaker 1 (00:31):
Should we be worried about this? It's a pretty stubborn
pre COVID number on MIGRA on tourism.

Speaker 2 (00:39):
Yeah, that's right, and sims of the shortfall if you
put it that way, it's three. We're board based by
different markets, particularly Europe about thirty percent below pre COVID levels,
China about forty five and for the rest of Asia
about thirty percent as well. So it is a reasonabor
based reason for that. Now looking at probably the reasons, one,

(01:02):
the global economy is still of recovering from COVID, so
it will take some time. Two. New Zealand's are pretty
periphul destination for tourism the best of times, and we're
very small, only about two point two percent of global tourism.
Probably the most important reason, I think is that cost
remains stubbornly high for people getting to New Zealand. For
long away New Zealand's are recently high cost destination, and

(01:25):
airfares are still very high as well.

Speaker 1 (01:28):
So it's not us, it's them. Basically, they're in the
cost of living crisis too, and we're far away. It's
not that we've gotten ugly orly shining during COVID.

Speaker 2 (01:37):
Well I'm not so sure about that, And I mean
there are things you can do to make sure that
you're a lot more attractive destination. Arguably, we'll probably have
some work to do as well.

Speaker 1 (01:47):
Yeah, and when we are slapping on a tourist tax too,
which has yet to be felt. Let's talk about the
other elephant in the room, and that's migration. What happens
if we hit net zero next year? What does that
mean for us?

Speaker 2 (02:00):
Well, yeah, migration. If you like, as a viewer, I
suppose again, of how attractive you are, we've gone from amparible.
We're sort of at the head of the dirty stakes.
Very attractive now to locking at potentially net outflows next year.
Now that's really a reflection of where the New Zealand
economy is relevant to the rest of the world, and
at the moment we're weaker and those migration flows are falling. Now,

(02:23):
migration is the difference between two very big numbers, and
it's certainly possible we could see net outflows for next
year as well.

Speaker 1 (02:30):
Next year and is that really bad? I mean, what
does it do to our GDP? Obviously it'd be good
for presumably for demand on resources like hospitals, et cetera.
But what does it do to our growth?

Speaker 2 (02:42):
Yeah, I mean that's a good point. A lot of
the things, a lot of the resource utilization will ease,
so things like congestion, hospitalization that that will be easier.
The other side of the corner will be demanded, and
the economy will be a weaker. The housing market for example,
will be a weaker as well, less demand for housing
and potentially things like the labor market. Migration has been

(03:04):
a huge factor enable mu Zium to revise, you know,
enough staff for certain roles that might also be an issue.

Speaker 1 (03:11):
What's what's our projection for GDP for next year in
the following.

Speaker 2 (03:17):
Essentially it's been flat, well has a year or two.
We might see a bit of a rebound sort of
second half of next year and that should hope the
ten around migration flows. But again it's still quite a
long way ahead and it's still quite of uncertainly, but
hopefully we're past the sort of trif of the cycle
and we should start to improve by the d of

(03:39):
next year.

Speaker 1 (03:40):
You'd hope. So Australia is looking at one point two
percent for twenty five and one point nine percent for
twenty six, so we're going to try and beat them some.
Statched up with Mark, Thank you very much, Mark Smith,
asb Senior economist on those two new numbers, one tourism,
the other migration.

Speaker 2 (03:55):
For more from early edition with Ryan Bridge.

Speaker 1 (03:57):
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