By Bernard Hickey
The Reserve Bank has included a scenario in its June Quarter Monetary Policy Statement for a rise in net migration to 45,200 by mid 2015, which it said could add four percentage points to house price inflation and add 54 basis points to its projections for short term interest rates.
The surge in net migration from virtually nothing in early 2013 to over 30,000 in the June quarter featured heavily in the Reserve Bank's forecasts and in the news conference after the release of the MPS, in which the Reserve Bank increased the Official Cash Rate by 25 basis points and stuck to its hawkish forecasts for interest rates.
The Reserve Bank said the rise had helped grow the Labour force and suppress wage inflation. The bank is forecasting an increase in the working age population over the current migration cycle of 100,000 or 3% due to migration. This compares with a cyclical increase in migration from 2002 to 2004 of 70,000.
Reserve Bank Governor Graeme Wheeler was asked in the news conference (from 14 minutes in the video above) if he would like to see the Government change migration policy to take pressure off the economy and interest rates.
"Migration is in many things a very positive force for the economy, particularly if it involves increasing skilled labour. There are demand and supply side effects," Wheeler said.
"The historic experience is the demand-side impact tends to come through first in the economy and that will be reflected in higher housing demand. What we're seeing this time is that maybe the impact on aggregate housing demand may not be as strong as, for example, the 2002 to 2004 cycle because a lot of the net migration is due to New Zealanders staying rather than departing the country and also a lot of the arrivals are tied in to temporary work permits," he said.
"So it's possible we won't see the same dramatic impact on house prices we saw in 2002 to 2004."
Wheeler was then asked about the Labour proposal to control migration to take pressure off interest rates.
"It's very hard to fine-tune immigration to meet demand purposes. By the time you make an adjustment you may well find the situation has completely changed," he said.
10 Comments
Migration is in many things a very positive force for the economy, particularly if it involves increasing skilled labour. There are demand and supply side effects," Wheeler said.
Although clearly NOT GOOD for existing New Zealanders!!!!
Who might be hoping or training to get into those roles!!
Clearly good for Canterbury folk that want their city rebuild in this century, and clearly a positive for those not wanting construction wage cost pressures funnelling further into the RBNZ's OCR track.....these things are always a two way street. I"ll personally, and thankfully, take the immigration as a positive for the economy, as it has been for some hundred of years for NZ. What changed, nothing, you just have to accommodate it, and from time to time when it places pressures on certain parts of the economy, you just have to react to it, and fix it positively with the right attitude.
Re: Canterbury
Fix the actual problem, not import more patch ups.
perhaps if the rest of the country wasn't being forced to compete for earthquake upgrades it would help...
RBNZ OCR... again fix the problem, not stuff things up with more bad patch ups.
if immigration is such a positive...whyu are things so desperate that it's so needed.... oh yeah, because you're not fixing the problem
If people ran their business in the same way as you're talking about running an economy they'd be bankrupt within 5 years!
... in a year or two when the Australian economy resumes firing on all cylinders , we'll see a rapid decline in those figgers as Kiwis flee to Oz ....
And if they're so keen to clear off , why not allow other folk to come here , who want our citizenship ...
... foreigners aren't to blame for our housing bubble ... we are ... our governments , our local councils , our generous taxation rules , the RMA ..
Put $ 200 on Costa Rica to win the World Cup , and at 2500/1 odds , you'll have enough for a flat in Bluff if they win ... do you need my disclosure statement for this awesome financial advice ?
Labour would love to copy the Blair government and fill the country with third worlders on the pretence that it's good for our economy. Well I have news for all those who think NZ should have an open door policy - unselective immigration doesn't benefit the country or the econmy one iota. In fact there is an ongoing cost providing housing, education, food and health care for immigrants and their dependents forever. There should be a referendum on immigration policy - it's too important a subject to be left to politicians who invariably get it wrong.
If our current migration policy is not based on meeting demand, then what is it based on?
Also, I'm not sure how Wheeler's quote above translates into "Labour plan for migration controls wouldn't work". He just said basically that it is difficult to predict future demand. This doesn't mean that we shouldn't try, and certainly doesn't mean that it would therefore not work.
So I come back to my original question above.
Tommo
Your comment about Labour trying to fill the country with Thirldworlders is contradictory to the recent headlines by our esteeemed PM who favours migartion to bolster economy and attacked Labour for its stance on current level of migration. I am not Leftie infact I voted for John Key which in the hindsight I regret. Perhaps you may consider to examine the realtionship between National and Foreign Intersts especially Chinese.
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