HSBC economists say an upswing in the Australian economy may dampen NZ's migration growth, tightening the labour market, generating wage growth and lifting inflation

HSBC economists say an upswing in the Australian economy may dampen NZ's migration growth, tightening the labour market, generating wage growth and lifting inflation

New Zealand’s migration boom “may be peaking”, according to HSBC economists.

Paul Bloxham and Daniel Smith say the record migration we’ve been experiencing may be reaching a turning point, as the Australian economy recovers from its mining slump, attracting Kiwis and deterring those living in Australia from crossing the ditch to New Zealand.

They say a slightly weaker NZD/AUD exchange rate may also see Australia start to steal some of New Zealand’s thunder in the migration department.

“Although the swing is not likely to be large, we expect the current small annual net inflow to turn into a modest net outflow during 2016,” the HSBC economists say.

Bloxham and Smith explain: “Net inward migration has reached record levels, of 67,600 people, over the past year, which is a big change from 2012, when New Zealand recorded a small net migration outflow of around 1,000 people. The total swing in annual net migration since 2012 has therefore been just under 70,000.

“Of this swing, around 42,000 are attributable to the change in net migration with Australia alone. From a net outflow of nearly 40,000 people in 2012, New Zealand recently recorded a net inflow from Australia for the first time since 1991.

“The rest of the swing in net migration has been driven by an annual increase of around 12,000 in the number of students coming to New Zealand on long-term visas, and a rise in net migration (excluding student arrivals) from the rest of the world of around 16,000.

“Importantly, most of these swings in migration have likely been driven by economic choices related to work. Looking at arrivals by visa type, the largest increase has been in the number of migrants arriving on a work visa.

“Typically, trans-Tasman migration flows are largely driven by employment choices. Therefore most new arrivals, as well as many of the New Zealanders choosing not to leave for Australia, are likely to have been seeking work.”

Bloxham and Smith say empirical evidence shows how the New Zealand and Australian labour markets have affected migration.

“The significant net outflows of migration from New Zealand to Australia from 2010 to 2012 were driven by the very strong Australian job market. The strong AUD also played a part, most likely by increasing the NZD-denominated wages on offer in Australia. Many migrants from New Zealand to Australia move with the intention of returning home within a few years.

“The model also does a good job of explaining the large turnaround in migration seen since 2013. During that time, the New Zealand labour market outperformed the Australian market and the NZD climbed by around 20c against the AUD, nearing parity in early 2015.”

Pullback in migration could lift wages

The economists say a pick up in the Australian labour market, coupled with evidence in recent months that arrivals from the rest of the world are slowing, suggest that New Zealand’s migration boom may be peaking.

Yet they believe there’s a silver lining to the retreat.  

“It’s unlikely to happen quickly, but we may begin to see slower growth in the working-age population. As long as employment growth is maintained, as we expect, the labour market may therefore start to tighten and generate a little more wage growth in the coming quarters.”

The HSBC economists expect employment growth to remain buoyant as “New Zealand’s economy has had a good few years.

“GDP grew by 3.7% in 2014 and last year managed 2.5% growth despite a significant slowdown in national income due to a sharp fall in dairy prices. This growth has created jobs. Since the beginning of 2014 employment has grown at an average annual rate of 2.7%, which is strong by historical standards.”

But, at the same time, “Migration has driven growth in the working age population to 2.5% y-o-y, the highest rate on record. Combined with higher participation, this has meant that growth in the labour force has closely matched growth in employment.

“The net result has been an only modest decline in the unemployment rate from an average of 6.9% in 2012 to the current rate of 5.7%.

“In short, despite strong labour demand, the labour market has remained fairly loose which has kept the growth in wages subdued. Sluggish wages growth has put downward pressure on domestic inflation, which has been a problem for the Reserve Bank (RBNZ).”

With this in mind, the HSBC economists say a slowdown in net migration flows in coming quarters will provide the RBNZ with confidence that inflation may have passed its trough and should return to the target band over time.

“We still see a further cut to a cash rate of 2% as likely (pencilled in for June), but further cuts may not be needed if the RBNZ believes that inflation will pick up towards its target band over time,” they say.

ANZ pushes back OCR cut expectation

ANZ says it has pushed back its forecast for an Official Cash Rate (OCR) cut from June to August. It expects rates to fall as low as 1.75%, but not until next year.

ASB however believes the RBNZ will cut the OCR in June and again in August.

Westpac maintains the RBNZ will cut the OCR by 25 basis points in June, but will hold off further cuts this year. 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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63 Comments

a lot of auckland kiwis i know are heading to aussie (mostly queensland) as they have given up the dream of buying here and raising a family

Yes and a lot of quality migrants that I know are doing the same, moving to Oz and beyond. Lets face it, no one is going to stay in Auckland for the long term if they have no realistic opportunity to purchase their own home.

Kiwis are also deciding not to come back from Europe for the same reason. Everything is cyclical - as we all know - and demand will weaken eventually.

I'm not coming back from Europe until my £ buy more $. That's the only thing holding me back. There are lots of kiwis in Europe with a decent wedge of cash waiting for the same.

Gambling the lot on no "brexit", or hedging?

all in on "No Brexit". Aint going to $2.7 -3nzd = £1GBP in the next 2 months.

Or the next two years either.

went from 2 to 2.5 from May to Sept last year. It moves quickly when it gets going. Wheeler is being pressured hard to cut rates now. It will be quicker than that.

It's a possibility of course, but unlikely. However currencies are fickle and almost impossible to accurately predict. I follow them quite closely as I maintain a little currency app.

I reckon Carney will reach the end of his term having never raised a rate, here or Canada.

So do I. He's never raised a rate ever.

Yes suggest voting to stay in the EU then if you want the Pound to get stronger, if Britain votes to exit then the Pound will plunge.

Given the dire warnings of a massive house price crash on leave being circulated in the news today I'm being converted to vote Leave.

and mortgage rates will rise and the £ crash. Be careful what you wish for.

I don't have a mortgage and have diversified savings.

Don't really wish for brexit, but to see an overdue lesson taught on property speculation it would almost be worth it.

sounds awesome. cut off your nose to spite your face. You may not have a mortgage but millions of voters do.

Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.

When your nose has already been cut off its not so bad.

Millions have also been priced out.

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Indeed, in Auckland,it is typical now to be out of the house for work,for 60 hours a week,to get paid 40 hours, and only save the product of 10 hours net wages.its slavery,its not a life and its not a liveable city. Thats a sham and a shame

16
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Yep, and I'm moving out of Auckland to the provinces at the end of the month. Although income may be lower and cost of living for most necessities are still at Auckland prices there are more options for cheaper, more affordable shelter. A 10 minute commute, no traffic congestion, a simpler lifestyle and real jungle rather than a concrete one makes it all worthwhile.

So much doom and gloom here ..... think I'll tune in to "7 Sharp".... do you mean to tell me you don't buy the Mike Hosking "Positivity" BS ??? .... shame on you !

He is an absolute dick.

Just watching Newshub about working families living in their cars. Auckland - the city of dreams.

and this is going to increase government spending more and more over time as owner occupiers become the minority and house prices kept rising forcing rents up.
not to mention the lost spending in the economy that is all poured into housing.

I just watched that, it's sickening. There is no shortage of vacant land around Auckland why not let them set up something a little more civilised. Trailer park?

because it would look like Seweto.

Who cares what it looks like. You have _employed_ adults with kids living in cars. Out of sight out of mind?

I care! We are not setting up Soweto style shanty towns in New Elysium.

Yep we're going to end up like America with families and old people living in vans. And Zachary, since you're such the film buff with being slightly obsessed with the film Elysium.
I suggest you watch this film: Requiem For The American Dream. Because we're headed in the same direction and it's not good.

Here's the trailer: https://www.youtube.com/watch?v=zI_Ik7OppEI

Funnily enough I have not watched the film. I have seen the trailer, some excerpts and Everything Wrong with Elysium in 12 Minutes or Less. I like the concept of Elysium in the movie and in the Greek myth.

And they live untouched by sorrow in the islands of the blessed along the shore of deep-swirling Ocean, happy heroes for whom the grain-giving earth bears honey-sweet fruit flourishing thrice a year, far from the deathless gods, and Cronos rules over them

I think the age of American dreams are over and a new globalist world is emerging. This will see the rise of the super-cities and Auckland through happy historical accident is poised to be one of those.

As for Chomsky I'd have to say I'm pretty much the anti-Chomsky.

They should set up camp on the streets outside the central suburbs NIMBY brigade.

How many people living in cars have also fallen off the electoral roll and are disenfranchised through not having a permanent address?

How many people living in cars have also fallen off the electoral roll and are disenfranchised through not having a permanent address?

They should go to the taxpayer funded Mangere Resettlement Centre and ask whether there is a room for homeless Kiwis, or entry is strictly only for Mr Key's international guests?

251 Massey Rd, Mangere, Auckland.

Other than that, a good Syrian passport is said to cost about 1000 bucks.

One thousand refugees are not any great problem. One hundred thousand economic migrants certainly are. There is a difference between the two.

One thousand refugees are not any great problem. One hundred thousand economic migrants certainly is. There is a difference between the two.

Having lived overseas for quite some time, what are employers in tech like (in general) for flexible office hours and working from home to take some of the sting out of commuting?

From what I've read, there are myriad studies showing that it's significantly more productive to let people do flexi hours and work from home, but it gives control freak middle managers the twitchies, so tough luck, hours of wasted time in a car for you.

"From what you have read"

From my experience "flexi hours" in NZ means you do what ever hours needed to do the job, be that 40, 50, 60 or 70, if you are lucky they will allow some of that from home, if you are lucky.

Just been to see a friend of mine who's been having a hard time with anxiety and depression, suicidal thoughts...the whole shebang. She's been chucked straight on medication and is finding it harder and harder to cope. The one trigger? Questioning whether she'll ever be able to have children as her and her BF are saving like maniacs to buy a house. They have years ahead of saving and she can't see how having a family (which she wants) is possible.They are a couple in their 30s (both teachers) she's medicated to the eyeballs because she's facing some tough decisions. Again she's someone with all her family and friends in Auckland and doesn't really want to be pushed out. Life handing an ultimatum. I know it doesn't seem as bad as kids living in cars, becuase that's disgusting and scary that we've come to that. But it's another problem, another 'symptom' of what's going on. I know I fight an on-going battle with anxiety due to the current climate, I have the same thoughts as her. I've just accepted them more than she has. Doesn't make me any less sad about it though. That's my tuppence worth for today.

You would think a couple of teachers could move to another town in New Zealand and have a good life with a home of their own and start a family. Surely that is better than being medicated to the eyeballs trying to cope with anxiety and depression? Are family and friends that important? I don't have any friends. Do grown ups need friends?
Haven't seen an update on your blog for awhile. You should keep that up as you are a good writer.

See what you are saying and I agree yes, they could have a better life. But why has it come to the point that the only way you can do these things is to leave the place you were born? Yeah, ok "it's the new way of life" but some people just aren't that quick to adjust.
Ta, re. the blog. I do need to write more but I got a massive freelance project on the go at the moment. Luckily I love to work ;)

Having to leave places is not uncommon. My parents, with four children, felt they had to leave Kenya in the late fifties as sleeping with a sten gun was becoming uncomfortable. They headed back to England and worked as farm labourers for awhile. They got a lucky break and made a bit of money and then headed to NZ on the advice of family living here. When we got here the other family had headed back to England with the ships actually passing each other travelling in opposite directions. We found ourselves alone in a land a bit like North Korea is today. But it turned out okay.

So future teachers in Auckland will have to be partnered up to somebody wealthy enough to allow both to live there?

what about nurses, firemen, policemen, will we turn back the clock where the government will have to provide accommodation or pay extra to work in Auckland.
all extra cost that will grow over time. and who is expected to pay, it will be middle NZ with their taxes.

Just read an article published in the Des Moine newspaper saying that most major cities in the US are finding it hard to recruit fireman,teachers,policemen etc due to the cost of renting in the CBD.

You are right Zach. Having ones health, sanity and starting a family is a wealth far greater than any fiscal wealth. Keeping in touch with family and friends is important to many, but this is easy and cheap thanks to technology. And I like the idea of not paying a bank $100 / day to use their created money!

I've suffered from a few episodes severe anxiety myself. Same circumstances, same trigger.

I hear you. I feel you. Absolutely ditto mate x

It's unfortunate, but the only anxiety attacks the majority of the generation above you are having is over whether or not they should have purchased their 6th rental!

It's sad she is feeling that way but maybe the problem is that many young people in NZ are way too obsessed about property ownership and have a wrong idea about the things that bring happiness.
Maybe it's time for many to live their lives, have kids if they want to and pay for a service like accommodation like many do in countries where population is quite happy (Denmark, Switzerland..)
Just saying that maybe as a society we should do more to ban from our mindset the idea that property ownership at any price and huge mortgages are the path to happiness.
We got our first baby, we're renting and will continue happily renting while saving money for whatever may happen but without forgetting how to live and when is the time to live.

Renting is an option. Waiting is an option. Migrating is an option. Refusing to embrace this madness is an option.

I feel sad for many young people like myself who live with fear of missing out. Don't believe this is the new paradigm. There are always options.

If only many were less obsessed about it the situation would be a normal one where it's not fear what moves us to make the most important decisions in our life.

Good luck to her.

Fantastic reply. I'm slowly getting there. I hope she does too. I do tend to agree that it's a very unhealthy obsession at the moment and I'm slowly starting to try to let it go. For two years I have lived in fear and worked myself to exhaustion which in turn led to the psychiatrists office. Now that all this is out in the open I feel better somehow. Vindicated that I wasn't just imagining that this was crazy. Therefore, I've managed to step back somewhat in the last month or two. Quit one of my extra jobs that I hated and get back to doing things I love. Thanks for this, it was a refreshing reply.

NZ$495,000 buys you a modest 3 bedroom house in the northern areas of Brisbane (ie Bracken Ridge - 22km to CBD) but you may have trouble finding work here unless you have a much desired skill (like teacher) as there really isn't any upswing in the economy here in Qld at the moment. You can get cheaper houses in the west and south of Brisbane but it would be like living in Sth Auckland :p

If the Govt wishes (& they do), they will instruct the Immigration Dept to alter the settings to maintain and keep growing immigration, & keep growing incoming students, & incoming 'wealthy business migrants' .
There are many more applicants for all categories than accepted. There is an insatiable and growing demand from India, Asia & elsewhere to live in NZ. It's an easy growth target for the NZ Govt to keep increasing.

Immigration may be "peaking"? Like the sun or the tide. I find it interesting that metaphors are being used that depict immigration as a natural phenomenon, one we have no control over.

Immigration is governed by simple laws. Strictly speaking only NZ citizens are absolutely entitled to come to NZ. The rest is up to us. We should not forget that.

No one cares what thinks NZ citizens while reach overseas investors filling up pockets of our corrupted officials. If you dont like australia waits for you.

So its okay for NZ citizens to move elsewhere but people from other countries aren't entitled to go to NZ? sounds hypocritical to me.

Before not so many people living on street. Now its new reality. After kids on street will not surprise anyone. Robbery and killing at day light will become new reality. In some city parks already there is a tent and someone is living.

This is a disgrace in such a prosperous country. We used to be shocked when we saw this sort of thing in foreign countries now it is also our reality. I genuinely never thought id see the day in New Zealand. Meanwhile CEO's are earning 40x median wage and it costs a million bucks to buy an average house in many Auckland suburbs. Is this the 'brighter future' John Key promised us?

There is bright future for NZers, the list of such people should be somewhere.

I hope not! Australia grew by the population of New Zealand in just 12 years. the Australian economy won't return to the mining boom days.

Australia needs less migration. immigration to Australia should be cut by 50%. Australia has the highest foreign-born population in the developed world (28% of the Australian population). migration to Australia from New Zealand should be capped. New Zealanders being exempt from foreign buyer restrictions in Australia should be stopped.

The Australian housing market is a monster that needs to tamed. Auckland doesn't even come close to Sydney on house prices. all non-citizens who buy property in Australia should be hit with a major land tax.

New Zealand needs more migration with it's low birth rates below replacement level,aging population & ghost towns appearing in the regions.

Actually, it comes pretty close.

Self-fulfilment

quote:- NZ needs more migration with it's low birth rates

That is self-fulfilling as young NZ'ers can no longer afford to have children -

re-inforces the constantly repeated govt solution -

bring in more migrants