NZ now the 'lucky country'

TRACY WATKINS
Last updated 05:00 31/05/2014
Migration
POPULAR LAND: Treasury is now predicting that net migration could top 40,000 later this year.

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Call it the boomerang effect. It was not that long ago that an exodus of New Zealanders across the Tasman plunged the country into a fit of national angst over whether anyone would be left to turn out the lights.

But the grass really is greener in New Zealand - for now at least.

For the first time in decades, we are close to a tipping point where more Kiwis return home than leave, thanks to a booming economy and skills shortage.

Already numbers leaving New Zealand for "the lucky country" have dropped to a trickle. In April, net flows across the Tasman dropped to just 200, the lowest since records began in 1996.

Couple that with annual immigration flows and Treasury is now predicting that net migration could top 40,000 later this year, sparking a new debate over whether the sudden influx will put pressure on an out-of-control housing market in Auckland. The last time numbers reached that level was more than a decade ago, in 2002 and 2003, coinciding with the start of the last housing bubble.

Labour leader David Cunliffe has been accused by National of beating the anti-immigration drum after proposing the Government use more levers to control the flow of new migrants to smooth out the peaks and troughs in net migration.

But his finance spokesman David Parker says Labour is saying nothing different to what Treasury and the Reserve Bank have stated publicly.

"It's abundantly clear that spikes in immigration that happen at the same time the economy is doing well and housing supply is tight have large effects on house prices. And those large effects on house prices have economic effects both within housing and the wider economy which are important."

The flow-on effects included higher borrowing, which in turn fuelled lower savings and put pressure on interest rates, which in turn pushed up the exchange rate, Parker said. "So those negative effects are pretty clear."

Labour's proposal would, in part, see the "points system" under which skilled migrants get entry to New Zealand tweaked in response to net migration flows.

That would see thresholds raised or lowered to smooth out net migration and avoid big swings in either direction.

Parker acknowledges there can be problems with that approach, including a lag time between approval and arrival, the wage effects of inward migration at times of supply constraints and the need to meet skills shortages. But he says none of those factors alone are reason not to look for solutions to the current cycle of peaks and troughs.

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"It's been absolutely clear for more than three years now that we've got a housing problem in Auckland. So there have been three years when it would be possible to change the points system. There would be three years in which it would be possible to say the skill shortages in the IT sector, for instance, need to be better met by more training of New Zealanders to fill those positions [rather than new migrants]."

But Immigration Minister Michael Woodhouse says Labour's numbers don't stack up. Data for long term migrants captured everyone from working holidaymakers, to university students, work tested migrants, refugees and skilled migrants.

One area where there had been strong growth in long-term migration was working holiday visas, including those from France and Germany, two countries with uncapped reciprocal working holiday schemes with New Zealand.

The number of resident visas granted had dropped, from about 51,000 in 2005-2006 to about 31,000 in the most recent year.

"So before we get too panicky about whether or not lots of people are coming in and buying houses in Auckland we need to understand what this data is telling us . . . and it's just simply not accurate to draw the conclusion from that data that German backpackers are somehow driving up Auckland house prices."

- The Dominion Post

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