Statistics NZ will publish the monthly migration figures this Friday and, on recent trends, the net inflow is likely to be just over 72,000/year. The Labour Party believes it can cut that by 20-30,000/year by enforcing rules more tightly.
On Friday, economist Gareth Kiernan warned that cutting the number sharply could cause a slump. Mr Kiernan’s premise seemed to be that more migrants were needed to service the needs of more migrants, and that cutting the number of migrants would take away the workforce needed to service those extra migrants.
His second point was not about migrants but about the behaviour of the Reserve Bank. His slump would arise not so much from cutting immigration but from the central bank ignoring changes in the economy and raising interest rates anyway, thus harming the economy.
All political parties agree that immigrants should add to New Zealand, not detract, and the Government’s critics take that a step further, saying the direction “export education” has taken, toward low-level learning & backdoor entry to permanent residency status, should therefore be curtailed.
Who builds our houses?
The first irony in New Zealand’s immigration debate is that many of the companies building much-needed houses in Auckland are owned by immigrants, often with investor support in Hong Kong or China.
You could say that, without so many immigrants from Asia, the input of these Chinese builders wouldn’t be needed. However, 2 of New Zealand’s biggest housing companies through decades, Universal & Neil, have been Asia-owned for years. A third, GJ Gardner, is an Australian franchise. Would New Zealand have built as many houses as it has in recent years without that foreign input?
How to get voters to switch – or not
The second irony is that, since 1972, no party (or party in coalition) has held power beyond 3 consecutive terms, but Labour & the Greens appear determined to hand National a fourth term because they haven’t enunciated policies which will pull voters to them from outside their bases.
As I was writing this, a new campaign call for support arrived in my inbox from the Greens. In the middle of its worthy aspirations was this sentence: “To do this, we need to you.”
We all make mistakes, but I read that puzzling sentence shortly after trying to wade through the party’s verbiage on migration, which read more like a call to support refugees and close the door to people the party doesn’t like, notably rich people.
Under policy point 5, Selecting voluntary migrants, I took greatest delight in point 4, which followed a statement that “people shouldn’t be able just to buy their way into Aotearoa”:
- Tighten up on scams in which overseas millionaires buy up NZ property by making business-development promises that they don’t keep. We will do this by
- Using a 3-year provisional visa for investor migrants
- Undertaking annual audits of investor migrants’ businesses via extended case management, paid for by the business being audited
- Ensuring that the audits include checks for viability, sustainability & desirability and are undertaken by immigration officials, an accountant & a marketing consultant. These audits, prepared independently, together with a police report & any complaints, will form the basis of the decision.
I’ve always found the chip-on-shoulder view of life is as distorted as the silver spoon version, and bludgeoning aspiring Kiwis with this vengeful kind of red tape doesn’t seem a good way to make friends.
Labour acknowledges migrant heritage, but…
The Labour Party acknowledges New Zealand’s immigrant heritage in its policy, but says National, in its 9 years heading the Government, “has failed to make the necessary investments in housing, infrastructure & public services that are needed to cope with rapid population growth. This has contributed to the housing crisis, put pressure on hospitals & schools, and added to the congestion on roads.”
Labour, in government, had an immigrant spike in 2003-04 – unannounced, unmanaged and, because local councils had no warning of the influx, they weren’t prepared to cope with it. The economic boost helped the party get re-elected in 2005. National’s spike of the last 3 years has gone for longer, but both have left large infrastructure deficits and speculation-promoting price escalation as direct consequences.
Labour reckons it can cut net immigration by 20-30,000/year.
That’s going to happen anyway as soon as Australia gets back on to what had been assumed to be a never-ending economic growth path, so the immigration cut in New Zealand could go deeper, reducing the net inflow to 10-20,000/year.
Australians thought wrecking the economy was beyond the ability of any politician, but finally they found a couple who could do it. However, the mining sector is looking more positive by the day and “the lucky country” will soon be just that again, and thereby thoroughly inviting to thousands of New Zealand tradesmen.
When those tradesmen start to head west again, New Zealand will once more be left pondering how to fill the gaps. Kneejerk responses aren’t an effective alternative to sound long-term policies, but kneejerk is where the migration debate has headed.
GST sharing rebuff was an opportunity missed
The National government’s unwillingness to share gst windfalls from the rise in tourist numbers made it plain that the governing party’s floundering was exasperating business people around the country; an opposing party that offered a raft of constructive new economic policies incorporating changes to tax distribution could have lifted its vote immensely.
Mr Kiernan, Infometrics’ chief forecaster, thrust his tuppence-worth into this policy abyss on Friday, when the economic forecasting company’s latest predictions indicated gdp growth would slip below 2%/year this year – before any further help downward from politicians slashing migration.
The threatened migration clampdown would lead to an economic slump, he wrote, adding: “New Zealand’s economic growth is being constrained by shortages of labour in key areas, and this problem will become more widespread if there is a significant & rapid tightening in migration policy following this year’s election”.
Slower near-term growth in construction activity & household spending would cut growth, he said.
“Although growth is forecast to rebound during 2018, that pick-up is contingent on the continued supply of labour provided by foreign migrants coming to New Zealand for work, on which businesses have become increasingly dependent.
“High levels of immigration have undoubtedly contributed to stresses around infrastructure & the housing market, particularly in Auckland. But employment growth of more than 1%/quarter over the last 18 months demonstrates the need for workers across the economy.
“Without these inflows of foreign workers & returning New Zealanders, businesses would have struggled to meet growing demand, and cost pressures would be even more intense in areas such as the construction & tourism sectors.”
Mr Kiernan’s warning invites the question: If the number of immigrants falls, so too will demand, and the economy should become more manageable, supposedly enabling a catch-up in the supply of infrastructure & houses. A slowdown, yes, but a damaging slump?
Mr Kiernan said cutting immigration this year would have negative repercussions for economic growth during 2018 & 2019, constraining activity through higher labour costs: “The inflationary risks associated with these cost pressures would also be likely to compel the Reserve Bank to raise interest rates sooner than would otherwise be the case.
“Given the slowdown already occurring in sales activity & house price growth, this potential cocktail of rising interest rates mixed with a government clampdown on migration would be lethal.
“Even with modest increases in interest rates from mid-2018, medium-term growth in household spending will be constrained by high debt levels, which have climbed from 146% to a record high of 167% since 2012.
“Faster lifts in mortgage rates & debt-servicing costs would threaten a jump in forced house sales, hastening a correction in the housing market and hammering consumer confidence.”
Those supposed consequences look like consequences of not adjusting policy to match changed conditions.
Mr Kiernan said the surge in migration over the last 4 years could have been more carefully managed, thereby preventing the housing market imbalances from becoming so critical. But, although he expected net immigration to gradually ease over the next 5 years, “a cautious approach is needed to avoid replacing one lot of problems in the economy with a completely new set. Ultimately, high migration levels are a positive reflection on New Zealand’s economic performance. We’ve been able to attract & retain workers in this country because our growth over recent years has outpaced that in other developed economies.”
Not quite true. A high proportion of immigrants have been low-level students-come-menial workers who have held bottom-rung wages down. At the same time they have increased demand for services, and for housing.
While I’ve said Labour hasn’t enunciated policies that would pull voters from other parties, elaborating on how a reduction in immigration would be done – and what it would achieve for other groups – would rebalance the political scales.
Attribution: Infometrics release, party policies.