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Westpac economists see net migration in future at around half of the pre-Covid levels following the Government's review; huge reduction in economy's underlying growth rate; impact on housing market 

Westpac economists see net migration in future at around half of the pre-Covid levels following the Government's review; huge reduction in economy's underlying growth rate; impact on housing market 

The Government's announced review into migration settings will result in a "significant tightening" in the form of tougher skills requirements for new migrants, according to Westpac economists.

And this will have a big impact on the economy and the housing market.

In talking last week about its planned immigration reset, Government Ministers Kris Faafoi and Stuart Nash said when our borders fully open again, "we can’t afford to simply turn on the tap to the previous immigration settings".

"That path is a continuation of pressures on our infrastructure, like transport, accommodation, and downward pressure on wages."

And the the Government has asked the Productivity Commission to take a comprehensive look at New Zealand's working-age immigration settings. 

In Westpac's latest Weekly Economic Commentary, senior economist Satish Ranchhod says a tightening in migration settings along the lines the Westpac economists expect would mean that, when the borders do eventually reopen, net migration is likely to settle around 30,000 per annum through the middle part of the decade.

"That would be well down on the levels of around 50,000 to 60,000 per annum that we saw over much of the past decade."

He says the change would see annual population growth slow from rates of close to 2% prior to the outbreak to a little over 1% in the coming years.

"That signals a huge reduction in the economy’s underlying growth rate and is a key reason why we expect GDP will linger below its pre-Covid trend for an extended period."

Changes to migration policy will have "a myriad of effects" on the economy, Ranchhod says.

"On the demand side, this will moderate an ‘easy’ source of growth that businesses in sectors like retail and hospitality have enjoyed in recent years. It will also have an important impact on the housing market, with population inflows adding to the demand for both rental and owner-occupied housing."

Ranchhod says that in terms of the labour market, lower net migration will reduce the pool of available workers in some industries, which signals a related lift in wage pressures.

"However, with the Government looking at a targeted tightening of migration settings, impacts will be varied across sectors. In particular, we’re likely to see fewer unskilled workers arriving, which will be particularly important in areas like hospitality and retail."

Net long term migration

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55 Comments

17
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"huge reduction in economy's underlying growth rate; "

That's maybe what they said, but it's incorrect. Adding people isn't 'underlying', its 'in addition to.'

And our underlying growth rate is, in physics terms, negative. Has been since European settlement started, and arguably from before that. Someone forgot to count stocks......

28
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30,000?

Better, but still one too many zeros there.

Annual immigration or BTC?

33
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Why should we believe a word these clowns say? They do the opposite every time. I would trust an ex used car salesman who has just become a real estate agent more than any Labour member... and I stupidly voted for them.

Well... it can also be a subtle warning to RBNZ to think before announcing any action on 26th May - most probable can trust Mr Orr but just in case, he needs an excuse though is master in spinning a web specially to protect his friends and community, he represent - speculators, who are helping him to run the economy/banks.

"impact on housing market"

21
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My vote too. If only National could stand for something and I might move back from Labour. If National stood for our nation, its people and its land I would support them even though their MPs are not spectacularly talented. However for the two decades I lived here: our land - they sell it; our people: if they emigrate - they couldn't care less, if they stay but are in poverty - they couldn't care less. Do they want to improve our nation with superbly talented immigrants? No they prefer Uber drivers and checkout operators and rampant worker exploitation. I'm depressed.

10
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they prefer Uber drivers and checkout operators and rampant worker exploitation

Rather ironic that despite having thousands more Uber drivers, checkout operators and cooks in the main centres, all those basic services are more expensive than ever.
Basically, much of the limited economic gains from population growth and wage suppression at such a grand scale have trickled into beefier margins for a handful - banks, property investors and oligopolists.

We had an ex used car salesman who became a real estate agent as our agent... and he was really good. Really good at getting prices higher than other agents.

I trust Westpac, they almost always get their forecasts right. Cough cough.

It's not like they have to support the government for whom they are the banker......

22
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I'm expecting our migration numbers to double to be honest, this govt got no other game plan...

So on one hand there is immigration of non kiwis, that is relatively easy to control if there is the will.
On the other hand there is the movement of kiwis, which can be volatile.
Do we see a flood of returning kiwis, viewing NZ as a safe haven? Or do we get the reverse as international economies strengthen?
Or perhaps somewhere in between?

32
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I'm expecting a lot to move to Australia. NZ isn't offering much to young workers that don't yet have a property.

21
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Likewise. Australia isn't the land of milk of honey, but NZ really doesn't offer much hope to young renters. I'm tempted to join them.
It'll be interesting to see how this all plays out.

Isn't property in Aus just as overpriced?

18
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It is in Sydney certainly but not so much in many other places. The income level is higher so it's more affordable. Then there is the generous super system and things are generally cheaper there. When I moved to Sydney I was able to save a lot more than in NZ in the same job. I highly recommend it.

I think for the income to house prices/ cost of living ratio it is much better. I’ve lost 2 friends to Australia since the bubble was introduced.

14
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Aus is not just as overpriced. NZ is 2nd highest house prices in the world compared to income, behind Luxembourg. Eg teacher in aus 30k more, then buy a house in Bris for 300k less than auck.

Sums it up really

10
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Yes so am I, its a lose-lose of good old socialist NZ, lose our workers during their working life, only to have their used carcases return to collect super and rely on our health system when they retire. They are outside the health and benefit system over there so they will return eventually.

They aren't outside the health system. Kiwis get medicare. Lots of Aussies don't get the pension as it's means tested over there.

At the moment if you are 65 or approaching that age you will get Govt super in NZ ...if you move to Australia you will not be entitled until you are 67 is another consideration.

Not offering g much to anyone working although WFF is up for review. I dunno Grant 50% of the population on some kind of welfare not enough for you yet?

Here comes the UBI.

Voila, reduction in house prices and rents. It must be part of a strategy by Grant and Jacinda. Man are they clever...........

this will moderate an ‘easy’ source of growth that businesses in sectors like retail and hospitality have enjoyed in recent years

The bulk of NZ's economy is built on businesses turning an easy buck without the need to invest in productivity tools, innovation, management efficiency or decent wages.

Most small Western economies have a handful of large companies that provide high-income employment and greater export earnings to the nation (Australia's Rio Tinto and BHP, Norway's Equinor, Finland's Nokia, Switzerland's Glencore and Nestle, Sweden's Ericsson, Denmark's Maersk and Lego, and so on) and we've got none of that!

31
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Once upon a time, migration from the UK and Ireland and parts of Europe tended to be the disenfranchised in their own land who sought the potential for a new start in the antipodes, the land of milk and honey and sunshine. They tended to arrive with $1 in their pocket with the hope of a fresh start. They started at the bottom of the heap and pushed the locals who were already on the heap upwards. Everyone benefitted. No-one was disadvantaged. Now, the game has changed. The wealthy from other countries are arriving as economic or political refugees with economic clout. They come in at the top of the heap and push the locals down economically. They have the economic clout to out-bid the locals. Price no object.

The worst aspects are they are arriving at a rate greater than the existing society can assimilate them. They are organising into self-help enclaves. That is one very noticeable change in Auckland. The enclaves. It is new. It is foreign. With the consequential pushing the locals out of their nests, and out-pricing the local new-home creators.

10
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Mr Orr and Politicians will be please to hear that locals are been pushed out to accomodate their rich foreign friends - No difference between John Key and Jacinda Arden - same breed.

Jacinda Arden mission, is it to remove poverty OR to remove poor.

Even Bernard Hickey sees it
Quote - This is how growing inequality works. It creates enclaves and slums out of towns like Cambridge, which is where I grew up from age of 13-18. It was a mixed town then in 80s. Not anymore.
https://twitter.com/bernardchickey2/status/1394060504293724162

Killing Cambridge
https://www.stuff.co.nz/life-style/homed/housing-affordability/125118260...

But but but I thought we were going to have the whole world knocking on our door saluting us for our great COVID execution. We of course were supposed to let in the boatloads to add more demand to housing or at least that was the narrative.. hah

I thought the conventional wisdom was immigration has little to no bearing on housing...????

Affordability is measured in terms of a "single family" unit

First hand experience
Way back in 2005 while visiting a friend in Lincoln West Auckland attended an auction of the house accross the road. Small house. A lower economic area. House to the left of the house for sale was a state house that was a typical 6 nights a week party house with a constant stream of visitors

There were 2 bidders. 1 bidder was a single Maori couple. The second bidder comprised 2 Romanian families acting together. The second bidder blew the first bidder away. No contest.

During the 2 months whence house prices scorched higher there were reports of families joining together and combining their resources to compete in the investment space. It's happening. What else would you expect. Single unit families acting alone have been pushed further down the ladder

Affordability is being re-defined

https://www.interest.co.nz/property/108418/anz-housing-report-says-urgen...

Yes, the word 'affordability' has been highjacked and defined, because it fits the narrative of those making money from property (by doing nothing) to change it.

But words are important. That is why it is important to use the median multiple definition of housing affordability (which is an internationally recognized measure), ie 3x median income multiple, ie all housing in NZ is classified as unaffordable by international standards.

And while it is not a perfect measure as it underestimates the level of unaffordability, it does highlight that the higher the median multiple, then the more dysfunctional the housing market policies.

And there is plenty of evidence of what these dysfunctional policies are.

14
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“net migration is likely to settle around 30,000 per annum”

So around the number promised by Ardern back in 2017 – but who then happily failed to a considerable degree, year in and year out – culminating at over net 90,000 year end March 2020.

A truly baffling level of incompetence on display.

I really have very little confidence with this lot when it comes to enacting a well targeted and managed immigration policy - it sadly appears too much to ask of them.

11
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Totally agree on their inability to implement a policy / plan.
I remain skeptical that much will change re immigration settings.

In the absence of low skilled migration, Kiwi businesses will have to adopt better management practices, acquire better tech tools and pay for Kiwi workers to train and operate those tools effectively.

The easier way out is for those businesses to wail until the government blinks, rubber-stamping 150k+ visas each year.

Keep the borders closed and that number is a possibility
However the economic damage will force a change of mind, but way too late as they don't understand business or what is necessary to generate the economic performance.

30,000 pa is classed by Stats NZ as very high based on 2016 base population projection https://www.stats.govt.nz/information-releases/national-population-proje...
(See: Very High Migration: Assumes net migration of 30,000 in each year from 2021.)

It is very high. Per capita to match most developed countries it would be roughly half that.

seem to be a tactic of the banks analysts that any change that might impact their bottom line... get it out in the public early that "this may affect your city home, rental in hamilton and bach at the beach lifestyle" if you dont kick up a fuss before the government get some numbers on paper ... let the paupers do your begging.

seem to be a tactic of the banks analysts that any change that might impact their bottom line... get it out in the public early that "this may affect your city home, rental in hamilton and bach at the beach lifestyle" if you dont kick up a fuss before the government get some numbers on paper ... let the paupers do your begging.

It's a total subversion of democracy, yet they are in our media 24/7 these days. Also busy lobbying government 24/7 as well. We are getting to be like the US.

13
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We have a joke of a media, very very lame indeed.
I mean the quality of analysis of the Budget was really poor.
You know it's dire when you start to think Heather Du Plessis-Allan is one of the better commentators around...

Headlining policy but not detail on how and why when.

Lap dancing media just tow the line.

13
up

Nothing but endless propaganda by the banks for the benefit of the banks. Why anyone would give the 'economists' (paid bank PR spoke-people) the time of day is beyond me. They should get very short shrift from government but I was disgusted to see one of them seated next to & in the ear of Robbo at some budget function.

12
up

Maybe the word will get out. If you come to NZ you will be exploited by an employer have all of your income taxed by that employer, taxed by the govt or taken off you as rent.

But I guess you can still jump high in font of a mountain and send a selfie home .

Seems its exploitation largely by their fellow countrymen

12
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Let's set a desired population number first. Immigration number could then be determined each year from that.

Yeah, there's a novel idea! Have a plan rather than just fudge around from year to year

The problem is that if you surveyed NZers I suspect most would give a desired population of around 5 million. If you surveyed those in property industry you'd get 100 million. So whose voice do you listen to?

Immigration falling, record number of building consents being granted and interest rates to rise next year. Anyone who thinks that property is still a good investment is looking at past performance, which is no predictor of future returns. All we need now is for the government to heavily tax vacant properties and move against interest only mortgages. Kiwis might be able to afford homes again.

Build that wall! ;-)

I would be interested to know what impact this will have on New Zealand's working age population projections over the long term. We already had a demographic trend of a very low birthrate and a substantial part of the population heading for retirement. Traditionally hiring in New Zealand has been easy but if the labor market tightens this could turn into a bidding war for workers.

A bidding war for workers would be good. ie: wages up.
Better than being taxed to support the lower paid and beneficiaries.
Money in pockets better for business as well.

So will Westpac now reprice lending based on their lower growth model? At the moment they are lending as though every bit of land in Auckland will one day have an apartment block built on it to cater for the 5m new arrivals over the next 30 years.

How about a public apology to Winston. He was correct all along.

I hear the endless chant to have a lower population growth rate. Has everyone forgotten the primary cause of population growth is babies. I really do not think any government on NZ is likely to introduce compulsory birth control policies. If it did the Pacifica and indigenous population would be the most impacted. Failing doing something on that front means nothing much will change.