ANZ economists see the burden for our economic recovery being put on domestic stimulus and productivity

ANZ economists see the burden for our economic recovery being put on domestic stimulus and productivity

Economists at the country's biggest bank say there's a "slim" prospect of a population-led recovery for the New Zealand economy given the weaker outlook for migration.

Our borders are currently closed, with migration therefore having all-but dried up.

ANZ senior economist Miles Workman, in a forecast update on migration, said the Covid-19 crisis has turned New Zealand’s recent model of migration-driven growth "on its head".

Migration-induced population growth has been "one of the most dominant drivers of economic activity in recent years", but our per capita GDP growth has trailed behind the official GDP measure. 

"This was never a sustainable source of growth," he says.

 

Now with the overall weaker outlook for migration in the future, the prospect of a population-led recovery is slim.

"That will put the burden on domestic stimulus and productivity."

He says that so far, the ANZ economists have "seen nothing on the policy front to convince us that productivity is about to take the reins", so expect a "pretty ho-hum performance" on the "other side" of the Covid-19 crisis.

"Cutting the fat in the near term does boost productivity – at the unfortunate cost of jobs – but long-run productivity growth requires investment, innovation and risk taking.

"The Government has certainly stepped up on the infrastructure investment front – which is great to see – but we don’t see this more than offsetting prolonged weak business investment."

The ANZ economists' current assumption is that New Zealand's borders will begin to reopen from the first quarter of next year, "and that will see an immediate, but partial, recovery in net inflows".

Workman says there will be fewer jobs available in NZ to attract non-NZ citizen arrivals.

"This will be particularly true in industries like tourism, construction and hospitality. Further, the slow recovery and persistent spare capacity in the labour market will mean that firms previously reliant on migrant labour may be more easily able – or at least will more likely be expected – to find domestic workers, although in some cases retraining will be required."

Migrant job losses in NZ (and the lack of a social safety net for many) are also likely to see non-NZ citizen departures lift, Workman says.

"This, together with significantly lower non-NZ citizen arrivals, is expected to be the main driver of a significantly reduced migration pulse on the other side of this crisis." 

Conversely, however, net NZ citizen inflows could hit new highs and provide some offset.

"As is typical during a global crisis, fewer job opportunities abroad are expected to keep more kiwis at home. That dynamic is likely to be amplified if health risks associated with travel remain elevated, and the threat of fresh NZ border closures remains. Bottom line: Kiwi departures are expected to fall off a cliff in the near term, and only partially recover once border restrictions are eased. All else equal, that will help put a floor under the decline in net migration.

"However, it will pay to keep a close eye on the recovery across the Tasman. A rebound in Australian employment growth has been associated with higher NZ citizen departures in the past. And a trans-Tasman bubble will make the relative economic performance of these two economies a more influential driver than otherwise." 

Workman says should net migration surprise on the upside, it will likely be owing to stronger-than-expected NZ-citizen arrivals.

"However, we don’t expect this will translate into a significantly stronger activity and housing pulse. After all, they will be coming home to an economy with very weak labour demand, so the boost to activity (and the housing market) will be less than is typical." 

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77 Comments

41
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"This was never a sustainable source of growth," Finally someone said it!!! Now lets do something about it - Jacinda, Todd, Grant, Winnie, Green duo etc are you listening?

25
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It was mentioned a few times on the comments section here at interest.co.

13
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Yes. I am among those who have mentioned it here many times but I am not the head economist at ANZ so it good to have someone with some credentials in agreeance.

Yes sorry Kauri, I meant that in a kind of sarcastic understated way.

All good bro :)

29
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Yup, i've been warning about this exact scenario for a long time now. As soon as unemployment starts rising it makes it far more difficult to justify our levels of immigration.

So we get a "bump" to GDP during the good times, but that "bump" turns into a pothole on the downside when a recession occurs.

I've never had a problem with welcoming immigrants and refugees to New Zealand. The addition of a diverse range of skills and experiences makes NZ better off overall. What I do have had a problem with is poorly thought out immigration policies that are just used to push down wages, prop up house price ponzi schemes and being done in an unsustainable way that puts no thought into the infrastructure needs (and how we will pay for it). The sad part is both labor and national are equally complicit is keeping immigration high to ensure the economy doesn't suffer in the short term, while creating long term problems.

It props up our education market. Our ruling elite are too influenced by academia and our academics are simply self-interested. Unlink ork visas with study and problem goes away and our tertiary education has to sell its quality not its short cut to residency.

15
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Yes, about time someone in this position said this. I hope all the other economists line up behind him as well. People like Shamubeel Eaqub, who have been remarkably silent on this aspect in the past.

Next steps establish training programs to bring people up to the skill levels required, fund R&D, build the tech to revitalise manufacturing and build resilience and an export industry. Find international partners to support this.

17
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Eaqub hasn't been silent about this. Years ago I remember him getting stroppy when anyone suggested we reduce immigration, he seemed to take it personally as an immigrant himself. But I did hear him mention immigration in more recent times and he seemed to have a more 'mature' perspective on it...
Obviously *some* people come at immigration from a bigoted / xenophobic perspective. But it's been so frustrating over the years for any discussion on the quantity and composition of immigration to be automatically shut down through labeling any suggestion of reductions as 'racist'.
Spoonley has been quite detestable in this respect.

So as an economist he couldn't see past the fact that he came from immigrant stock or was one himself? We all are, every last one of us, even Maori. But there are limits and the planet is trying to tell us that. Now he's got to get out from behind his bias's and get to the basics.

11
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Remember, besides bigotry, importing people to drive GDP is also cynical in my opinion.

26
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Mass immigration has just added fuel to our property ponzi - now we have additional debt to pay for that short term benefit (?).

Wrong. Importing people drives GDP. That's been its primary purpose. Pumping house prices is different.

Importing people drives demand for credit does it not?

Yes and no, but beside the point. The ruling elite uses GDP as a scorecard of economic success, not the number of and value of mortgages issued.

Yes and the furniture shops get a boost, as do the car dealerships and supermarkets at the very minimum... 2nd hand cars dealers that bring stuff in from JP have had a right old time the last 9 years.

11
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Take a look at when GDP peaked: 2003-04 and 2014-15.
Both, coincidentally, when immigration drove house sales/prices.
Also, per head of pop, GDP growth has been in retreat since 2014.

"GDP growth has been in retreat since 2014."

2014 being roughly when property also went gangbusters.

The perils of short-term pretend economic policy.

36
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No one campaigned on mass immigration. I suspect most would not vote for it either. Hope its a forefront election issue as, a combined with foreign ownership, it is front and center in driving inequality within NZ via the income to property value disconnect.

18
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I seem to recall reducing immigration being a cornerstone of the last election campaign. What happened after didn't seem to reflect that.

11
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Exactly. Labor (and Winston) both talked about reducing immigration during the election. Once they got in power however they both conveniently forgot all about it. That's a campaign issue fail, along with capital gains tax and Kiwi build.

The main reason that NZ did so well with the coronavirus was because of our small population. All the OECD countries had lockdowns not too dissimilar to ours yet they still have not managed to shake it off. Both Labour and NZ First campaigned at the last election on reducing immigration but have not done anything to reduce it since being elected. The issue of mass immigration should be the one of the main election issues and any party promises on this matter should be held to account.

"All the OECD countries had lockdowns not too dissimilar to ours". Utterly false. I'm curious why you would possibly think that? "Lockdowns" in most places were an utter joke.

Whether they were a joke or not, the evidence is pretty clear that, in general, the smaller/less dense a country's population the easier it is to manage virus. Here's a list for you - Ireland, Iceland, Norway, The Baltic states, PNG, The smaller states of Aus - Tas, WA, QLD, SA, Hawaii. Some bigger culturally homogeneous and well-ordered societies such as Taiwan and Japan are bigger but being islands helps too. My point, and Andys' (I assume) is that if NZ had a population of 10, 20, 50 million or more the likelihood of us controlling virus would be very slim.

Correct. It is highly likely that our small population and low population density has been a significant factor in our success.

The Tasman Sea and only having 5 main points of entry probably played a part as well.

Look at Colorado. Similar size, population income

Is Colorado an island in the Pacific?

Colorado has a major city of around 3 million - an interconnected hub at the centre of a virus-ridden continent-sized country. Hardly comparable.

A good point except for PNG - worked there for 14 years; married to it; no where is more interesting. However the word 'manage' and the PNG govt cannot be put in the same sentence. However it is just another example of how nothing ends up as expected in PNG.

I agree with the point about population density - when I lived in London you couldn't move without public transport; NZ is the opposite.

Okey dokey here is link to a map giving you an idea of the size of our country https://nzhistory.govt.nz/media/photo/if-new-zealand-was-europe-map
FYI South Carolina and Alabama are similar size population-wise to NZ they have respectively as from a day or two ago, 14,800 cases of C19 with 557 dead and 24,221 cases with 768 dead.

The key is - what surrounds South Carolina and Alabama cf. what surrounds NZ.

What surrounds NZ, the same stuff that surrounds the UK?

It seems an air of pragmatism and realism is sweeping over the ANZ economics team.

At some no so distance point we will presumably get the catch up news that excessive govt spending is going to end with an almighty thud.

Only at that point are we going to have realistic calls on Ue, rates and asset prices.

ANZ as DGM

They're just bitter and jealous of the genius landlords who "worked hard to get ahead"...

They're just bitter and jealous of the genius landlords who "worked hard to get ahead"...

Well they played their part with all their 'lending into existence.' But yes, they're possibly envious that their role is only in the 'monetary alchemy' side of things.

You're deluded about any almighty thud. By the way its QE not UE

Will increase our self reliance, for sure.
In the future, we may get more affluent migrants who may be serious about starting businesses here, thus helping the local population. They way NZ has delat with Corona is sure to stoke interest in such migrants.
Immigration NZ has to finetune its policies to take advantage of that and also to move away from the past.

Time for a National Referendum on annual number quotas for different kind of visas, to be voted only by Citizens.

“long-run productivity growth requires investment, innovation and risk taking.”
I assume they don’t mean flipping houses in a runaway property market...

"This was never a sustainable source of growth," he says.

Too true - however, those ANZ economists best be careful – their promotional prospects may well dim once the Chairman gets wind of their blatantly subversive outbursts.

14
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John Key - The epitome of the charlatan.

And Key is Muller's go-to guy for inspiration....? No immigration no real policy then

Todd from Accounts would be in awe of John Key

10
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Two new cases. From abroad. Got to keep borders shut for a while.

The coronavirus is at large in the rest of the world, so it is inevitable that a visitor from overseas will carry it in with them. It's not a case of "if" but rather "when."

TBH I'd been wondering why there hadn't been any cases at the border. Hopefully the quarantine is working as it should.

I don't think its a good idea to have big public events, like rugby, whilst this threat is still there. Everybody who was on the plane with these people have been exposed. What if it somehow slips passed the border and gets into one of these rugby games. Nightmare!

Get a life - there will always be threats. We've done our OTT lockdown, time to move on. There is no need to tear up our way of life on an undefined timescale.

This a serious comment? All it will take is one super spreader and we'll be back in level 4 lockdown. How does that sound?

There's something called a quarantine for both infected and non-infected arrivals. It should catch everything if our officials and their masters are doing their jobs.

"IF"

How do you know that the 2 new cases haven't been to the rugby at the weekend, been out on the town drinking in one of our main centers and 50, 100, 200 people or more are now transmitting COVID throughout the country?

Reminder of this one cluster https://www.stuff.co.nz/national/health/coronavirus/120902484/coronaviru...

Of the woman's wedding group – her husband's side of the family, including friends – 21 of the 23 tested positive.
But as New Zealand entered a nationwide lockdown days later, many of those guests had already been struck ill, as well as the bride and groom. As of Wednesday, 81 people connected to the event have Covid-19.

Ugh. Looks like they let these two out of quarantine early on compassionate grounds. Not looking like a clever decision right now, that.

"Looks like they let these two out of quarantine early on compassionate grounds"

I know of four unrelated people who died in the last 3M in NZ:

1) 49 year old female of heart attack - they were unable to have a funeral attended by all friends and family
2) elderly male - unknown cause - his son and the grandchildren all live in the US, and were unable to attend a funeral
3) elderly male - unknown cause - his 4 adult children were unable to visit him in hospital until he was near death. Extended friends and family unable to attend funeral
4) 60 year old male - suspected homicide - his 4 siblings who live in Australia were unable to attend a funeral.

Not sure what you're saying. There have certainly been lots of cases were exemptions weren't made. It seems one was here.

"There have certainly been lots of cases were exemptions weren't made."

You've hit on the point exactly ...

Whatwillhappen they are not. No one doing any self isolation job gets the basics (one nurse did but I think her beliefs were mostly political). One nurse confidently told me asymptomatic transmission was not a thing. She insisted you couldn't have Covid without symptoms.

We're not locking down again for a bad flu. The timid souls can lock themselves inside and the rest of us will get on with our lives.

Haha you sound so sure of that! I wouldn't dismiss it yet.

All the information out there, and yet, still, this.

12
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We were getting very close to real GDP per capita growth going zero and below - new entrants simply diluting the existing pool – rendering the whole immigration carry on even more pointless.

People leave to Australia because they think they'll get paid better, among other things. Pay people a decent wage to enable decent living conditions and they'll be less likely to leave.

Its not just people leaving, but the wrong type of people leaving - namely those that are educated that can make x-fold what they would in NZ. All of this only four hours flight away.

NZ is not a place for ambition. Its the comfort zone of the world. Specific to my circumstances it was a no brainer moving to Australia.

Businesses don't want to have to pay a decent wage. They want to have another poor immigrant working for them for as little as possible.

You do realise that's only possible because Government lets them? Past the public sector, they don't care, nor do they have to. They get paid either way.

Because of course Australia is not having any economic issue with the virus. Sheesh

Population led "recovery", don't you mean population led ponzi?

That's just crazy talk! Hush now and invest your money in the stock market or houses.

The ANZ economists' current assumption is that New Zealand's borders will begin to reopen from the first quarter of next year.

What in the world do they base that on?

Well, Bob from accounts said he heard from Bev in legal, that Rangi from mortgage, knows someone from MPI who has a contact in Beehive security, who is friends with the partner from someone in the National Party.....

Government makes up about 40% of the economy.
Treasury already has its wellbeing (improve net welfare of NZers, not just GDP) approach to cost benefit assessment
To improve the productivity we need to:

1) Make sure central government is applying the wellbeing cost benefit assessment to all its spending & it is being transparently reported to the public & media as a KPI. e.g. how much did the winding back of the proposed water quality regulations change the wellbeing benefit/cost ratio ??

2) Force local government through legislation to undertake proportionate wellbeing cost benefit analysis on all its spending

3) Move all government services to e-services (yes, with a wellbeing cost benefit assessment) where I live all federal e-services are available on 1 webpage.

from the 1980's Japanese tourists arrived , guides got residency , married etc. When that market collapsed many stayed on. The Chinese seem to have just arrived with their buses and vans. It became an acceptable "highly skilled occupation". Eventually they outnumbered locals. Now parked up in yards and on public assistance.
..........
Nigel Latta: Why elderly parents?
CEO Immigration NZ
Overall the net benefit of the highly skilled outweighs the costs of the parents. And quite frankly bring the parents is one of the factors we used to attract skilled migrants.