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 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 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 your projections around immigration and New Zealand.
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 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.
Okay, so net zero migration effectively, what do you mean by that.
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 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.
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?
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 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 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 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.
Do you have any figures that speak to those recent arrivals who are leaving again soon after?
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 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, 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.
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 has more money to offer kiwis of all age groups.
Liam It wasn't that long ago we were talking about this immigration boom, Like Michael touched on there, why this sudden turnaround.
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
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 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.
Is one of the factors though, that New Zealand isn't an appealing place to live anymore.
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 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.
Michael, do you think New Zealand's lost its mojo?
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, 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 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 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 trend of where we would have been without COVID.
Anyway, this must be a worry though, because immigration is critical to our country success, right.
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
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.
When was the last time we saw a loss of population?
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.
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, 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.
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.
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, 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,
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 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 across just the sheer size of the population.
Could the fallen migration fix unemployment in this country?
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. 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, 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.
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.
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 point seven five from the.
Current five point five.
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.
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 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
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 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.
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?
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 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 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 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, 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.
What do you think about this idea of bringing back foreign investors to increase immigration.
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 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.
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 to The Front Page on iHeartRadio or wherever you get your podcasts, and tune in tomorrow for another look behind the headlines.