Michael Reddell: A modest step that still ignores the bigger picture video

New Zealand takes in more new permanent residents than almost any and yet we have one of the poorest productivity ...
BEVAN READ/FAIRFAX NZ

New Zealand takes in more new permanent residents than almost any and yet we have one of the poorest productivity records, says Michael Reddell.

OPINION: As public unease about immigration has grown, including about the pressure on infrastructure and house prices, the Government seems to have felt a need to act.  

The first baby step was last year, when parent visa applications were suspended, the number allowed in on family grounds was cut, and the overall residence approvals target –  the centrepiece of medium-term immigration policy – was cut slightly, from about 47,500 a year to about 45,000.  But even with the slightly reduced residence approvals target, we will still be giving residence to three times as many non-citizen migrants, per head of population, as the United States does.

Successive governments have justified our immigration programme primarily on economic grounds.  It is supposed to lift the productivity and material living standards of New Zealanders. But that is only likely if the programme brings in very able, skilled and innovative people – the sort of people who typically have options in other richer countries.  But too many of those being given residence haven't been that skilled at all.  There were all too many chefs, retail managers, cafe managers and aged-care workers – and even a couple of hundred bakers last year.     

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Immigration Minister Michael Woodhouse revealed a tightening up of New Zealand's immigration system.

Many of those who come don't have long-term residence approval.  They are either here as students, or on short-term work visas.  In 2015/16, a staggering 192,688 people were granted temporary work visas in New Zealand, almost double the number granted such visas just 10 years previously.  And 90,000 people were granted student visas in 2015/16.

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They aren't flocking to our better universities, but to lower level "private training establishments".  All too many of these courses seem to be mainly a pathway to residence: people borrow overseas to get on to a course here, work while here (typically in quite lowly-skilled positions, directly competing with lower-skilled New Zealand workers), and then use the qualification – itself often of little real substantive value – mostly as a stepping stone towards residence points.

It is just another export subsidy. In practice, those who will game the rules get residence at the expense of more able and innovative people.

Wednesday's announcements are another baby step. There was nothing to deal with the student visa "rort".  But there are some small steps towards weeding out the lowly-skilled people from the work visa system. In future, you won't be able to be counted as "highly skilled" if you earn less than $49,000.  

Probably only government officials and ministers ever thought otherwise.  And, on the other hand, anyone earning more than $73,000 will automatically be counted as highly-skilled, no matter what their occupation.  And in future people on work visas will be able to be in the country for only three years.  

The announcements are likely to reduce the numbers of non-citizens arriving in New Zealand each year.  The changes should, at the margin, slightly lift the average skill level of those people allowed in temporarily, and might over time even raise the average skill level of people being granted residence.

But if the latest changes inch in the right direction, the new income tests aren't that demanding, and there are plenty of potential rorts that will need policing. That the Government won't give any indication of how large an effect it expects reinforces my sense that the overall effect will be small.

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The bigger problem is still unaddressed.  Among advanced countries, New Zealand takes in more new permanent residents than almost any and yet we have one of the poorest productivity records.  

Many non-citizens would happily come, but the relevant test should be whether New Zealanders as a whole (and not just individual employers or sectors) benefit from them doing so.  

There is no good evidence of such benefits. Even the proponents of the policy get rather uneasy when asked for evidence.  Despite that, for decades we've kept on bringing lots more people to one of the most isolated countries on Earth even as things like personal connections, proximity etc seem to have been becoming more important.  

Rapid population growth – without great new economic opportunities – simply skews the economy inwards. Successfully making it in global markets is the only reliable path for a small country to get and stay rich, and yet the relative size of our export sector is shrinking.  

It is time to give up the "big New Zealand" or "big Auckland" ambitions that seem to have appealed to our political leaders for generations.  Focus instead on maximising what we can achieve with our own limited natural resources and our own abundantly talented skilled hardworking people. 

Michael Reddell is a Wellington economist.  After a career with the Reserve Bank, The Treasury, and the International Monetary Fund, these days he writes about economic issues at www.croakingcassandra.com

 - The Dominion Post

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