Net migration 4,300 in June; highest since Feb 2003; Net migration to Australia was zero; First time since 1991; Record high 100,000 migrants came in year to June

By Bernard Hickey

Defying all forecasts, net migration surged again in June to an 11-year high as a net nil New Zealanders migrated to Australia, adding to pressure for the Reserve Bank to hike interest rates again on Thursday.

Statistics New Zealand has reported 4,300 net new migrants arrived in June on a seasonally adjusted basis, which was the highest since 4,700 arrived in February 2003 and the second highest on record.

There was no net migration of New Zealanders to Australia in June, which was the first time that had happened since August 1991.

The net migration of 4,300 was above economists' forecasts of about 4,000 and in defiance of expectations that an improvement in the Australian economy would start to improve and reverse the sharp slide in net migration to Australia. Net migration in the year to June was 38,338, which was up from 7,907 in the previous year.

The Reserve Bank, which has also been expecting net migration to slide back from its recent highs, has warned that strong net migration was boosting demand and inflationary pressures in the economy, reinforcing the need to tighten monetary policy. Stronger net migration was one reason why the Reserve Bank maintained relatively hawkish forecasts for interest rates in its June Monetary Policy Statement. The New Zealand dollar rose around 15 basis points to 87.1 USc after the stronger-than-expected figures.

Statistics NZ said net migration has been positive and mostly increasing since September 2012, when there was a seasonally adjusted net gain of 100 migrants. The difference between the net gains recorded in September 2012 and June 2014 was mainly due to: fewer New Zealand citizens leaving for Australia (down 2,400) more non-New Zealand citizens arriving (up 1,500) and more New Zealand citizens arriving from Australia (up 500).

Seasonally adjusted figures showed there were 2,000 permanent long term arrivals from Australia in June. There were also 2,000 departures to Australia in June, resulting in net migration of zero. The highest net loss to Australia was 4,300 in February 2001, just before an immigration policy change that restricted access to welfare benefits for New Zealand citizens arriving after that date. The non seasonally adjustet actual net loss to Australia was 330 in June, down from a net 1,718 in June a year ago.

Statistics NZ said unadjusted figures showed 100,800 migrants arrived in the June 2014 year, up 14%t from the June 2013 year (88,200). This is the first time more than 100,000 migrants had arrived in New Zealand in a year, and surpassed the previous record of 99,900 arrivals in the May 2014 year. 

Migrant departures numbered 62,400, down 22% from the previous year (80,300), and the lowest number of departures since the June 2004 year (62,300). This resulted in a net gain of 38,300 migrants in the June 2014 year, compared with a net gain of 7,900 in the June 2013 year, and a net loss of 3,200 in the June 2012 year.

The previous annual net migration high was 39,300 in the October 2003 year and the record high for the series was 42,500 in the May 2003 year. The highest net outflow was 43,600 in the July 1979 year and over the last 20 years net migration has averaged 11,700.

New Zealand recorded net gains of migrants from most other countries in the June 2014 year, led by India (7,000), China (6,300), Britain (5,500), the Philippines (3,000), Germany (2,200) and France (1,900).

Within New Zealand, 13 out of 16 regions had a net gain of international migrants, led by Auckland (17,800), Canterbury (5,600), Otago (1,100), and Waikato (800).

Reaction

Westpac Senior Economist Felix Delbruck said net migration was now clearly running ahead of the Reserve Bank's forecasts in June.

"That is a single bright spot in what has overall been a disappointing run of New Zealand data for the Reserve Bank," Delbruck said. Westpac expects the Reserve Bank to hike again next Thursday to be consistent with its previous forecasts, but then pause until January.

ASB Senior Economist Chris Tennent-Brown said he expected annual net migration to still peak at around 42,500, despite a gradual improvement in the Australian jobs market.

"Strong migration is providing a ready supply of workers and keeping NZ labour market strains low. But strong population growth will also create additional housing market pressures and drive stronger domestic demand and inflationary pressures," Tennent Brown said.

"Strong migration is one of the reasons why interest rates will continue to rise over the next couple of years," he said, adding he expected the OCR to be hiked again on Thursday, before a pause until December. He then saw another 75 basis points of hikes to a peak of 4.5% in 2015.

ANZ Senior Economist Mark Smith said annual net migration was on track to exceed a record-high 45,000 by the end of the year and was currently running at an annuallised rate of 50,000.

"Strong migration gains are adding to the economy’s potential growth rate, but this still looks to be insufficient to accommodate rising pressures on capacity," Smith said.

"Despite the stratospheric NZD and mixed signs on the activity and inflation front, the RBNZ look set to lift the OCR on Thursday, followed by a pause for the remainder of the year," he said.

(Updated with more detail, reaction, chart)