Migration boom may stoke housing market
The migration boom is running at its strongest pace for more than a decade, and risks reigniting the housing market, some economists say.
As the previous exodus to Australia dried up, there was a net migration gain of more than 38,000 people in the June year, according to Statistics NZ figures out yesterday.
Far fewer New Zealanders are leaving for Australia as the job market here picked up rapidly earlier in the year and the Australian labour market looked worse. And many more foreigners are coming to New Zealand.
Permanent arrivals for the June year topped 100,000 for the first time and those leaving dropped to their lowest point in a decade.
In June alone, just as many people arrived in New Zealand from Australia as crossed the Tasman the other way - the first time there has not been a monthly loss to Australia in more than 20 years.
The key factor in trans-Tasman migration is the job market.
The unemployment rate in New Zealand remains stubbornly high at 6 per cent, but job numbers have shot up 3.7 per cent in the past March year, with 22,000 jobs added in the March quarter alone.
The unemployment rate in Australia is 5.9 per cent, and has risen in the past year.
If the pace of the migration boom in the past three months continued for a year, the annual gain could top 50,000 - adding more than 1 per cent to the total population, stoking domestic demand and possibly the housing market.
The strong migration figures for June come just before the Reserve Bank's next decision on interest rates, due on Thursday. The central bank is widely expected to lift interest rates again, to 3.5 per cent, with more rate rises this year and next in part because of the migration boom. The month of June alone saw a net migration gain of almost 4300, the second highest on record.
In the past year, the net loss to Australia was about 8300 people, compared with more than 31,000 in the previous June year. Most migrants crossing the Tasman both ways are New Zealanders. Deutsche Bank economists said the stronger-than-expected migration figures "risk reigniting the housing market" and was a key risk that growth and inflation could be stronger than expected by the Reserve Bank.
Last month, the Reserve Bank warned that if migration were stronger than expected, official interest rates might need to go up further and faster, by an extra 50 basis points, compared with the bank's main projections. Stronger migration offset the recent bad news of falling dairy export prices, Deutsche Bank said.
But so far there is little evidence that the wave of migration is spilling over into the housing market, yet.
That is possibly because more people are coming here for work for perhaps a couple of years and are renting, rather than intending to stay permanently and buying a home. This migration boom is much more job focused than a decade ago, economists said.
This year, house prices are cooling off, with prices up 6.2 per cent in the year to June, as higher interest rates start to bite and the impact of speed limits on low deposit home loans, introduced late last year.
Late last year house price inflation was about 9 per cent.
But ASB Bank economists said they expected the surge in net migration to cool down in the next six months, with Australian job market indicators picking up recently.
Even so, annual net migration was expected to peak at more than 42,000, but it could be even stronger. Strong migration could see increased domestic demand and higher interest rates. "Strong migration is one of the reasons why interest rates will continue to rise over the next couple of years," ASB said. A rate rise of 25 basis points was expected this week and again in December, with another three moves next year taking the official cash rate to 4.5 per cent.
But more migrants also add to the pool of workers and that would help keep a lid on wage inflation.
KEY POINTS JUNE YEAR
Arrivals: 100,800 (up 14 per cent)
Departures: 62,400 (down 22 per cent)
Net migration gain: 38,300 (7900 in June 2013 year)
Record net annual migration gain: 42,500 (May 2003 year)
Annual net loss to Australia: 8300 (31,200 in June 2013 year)
Net gains from:
Source: Statistics NZ
The Dominion Post