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Treasury assumes annual net migration will fall from +68,000 in the year to March to +25,000 in the year ending June 2022 & assesses the implication for the economy

Treasury assumes annual net migration will fall from +68,000 in the year to March to +25,000 in the year ending June 2022 & assesses the implication for the economy

This is a re-post of the Special Topic in the Treasury's Monthly Economic Indicator report.

  • The Treasury has recently reviewed its forecast of net migration. We assume annual net migration to fall from 68,000 in the year to March to 25,000 in the year ending June 2022.
  • Our current net migration assumption for 2022 is 10,000 higher than in the Half Year Economic and Fiscal Update 2017.
  • The upward adjustment feeds into higher demand in the economy. This motivates increased investment in residential housing and for businesses to invest and hire additional staff.

This special topic presents and explains the Treasury’s latest forecast of net permanent and long-term migration.1

The special topic is in four parts. The first provides a summary of the migration landscape broken down by flow direction, visa type, and citizenship. The second part highlights the need for revising our latest migration forecasts. This part also presents the forecasts of Statistics New Zealand, Ministry of Business, Innovation, and Employment (MBIE), Sense Partners, as well as the Treasury. The third part presents the current projection for net migration and explains the logic behind it. The final part summarises the possible implications for our forecasts of other macroeconomic variables.

Where is net migration now? What is driving net migration?

Net migration started in the past few months to taper off after the record high of over 72,000 in the year ending in July 2017 (Figure 13). Net migration consists of four key flows - arrivals and departures of non-New Zealand citizens (Figures 14 and 15) as well as arrivals and departures of New Zealand citizens (Figures 16 and 17).

The complex composition of net migration partly explains why it is highly cyclical, and hard to forecast.

Figure 13 - Annual net migration

Figure 13 - Annual net migration

Source: Statistics New Zealand

Departures tend to increase with arrivals as a portion of recent arrivals eventually leave the country (Figure 14). The impact is lagged by around 2-3 years, in line with the time limits on many visas.

Figure 14 - Annual non-New Zealand citizen

Figure 14 - Annual non-New Zealand citizen

Source: Statistics New Zealand

Arrivals of non-New Zealand citizens by visa type (Figure 15) show that student visas have levelled off after pulling back from their peak. This is largely due to the tightening of English standards at the end of 2015 as well as the crackdown on illegal migration practices and fraudulent education providers.

Arrivals on work and resident visas show some signs of peaking with annual arrivals falling slightly over the past couple of months.

Figure 15 - Annual non-New Zealand citizen Arrivals by visa type

Figure 15 - Annual non-New Zealand citizen Arrivals by visa type

Source: Statistics New Zealand

Since 1980, net migration of New Zealand citizens has remained in negative territory ie, a net outflow (Figure 16). Most of the citizen flows are trans-Tasman (Figure 17). Comparing figures 16 and 17 reveals that most of the movements in annual citizen net migration are driven by the highly volatile outflow of New Zealanders to Australia.

Figure 16 - Annual Trans-Tasman and total net New Zealand citizen migration

Figure 16 - Annual Trans-Tasman and total net New Zealand citizen migration

Source: Statistics New Zealand

As the mining boom lost momentum, New Zealand citizen departures to Australia sharply declined over 2013-2016 and have been stable at around 20,000 since then. The net flow of New Zealand citizens to and from countries other than Australia has been broadly stable since the early 2000s, but there is now a slight net inflow, offsetting the slight increase in the outflow to Australia (Figure 17).

Figure 17 - Annual New Zealand citizen flows by country of origin and destination

Figure 17 - Annual New Zealand citizen flows by country of origin and destination

Source: Statistics New Zealand

Why do we need to revise our migration forecast? How do the forecasts of other institutions compare to ours?

Our previous forecasts relied on the assumption that future outturns of net migration revert back to the historic long term average sourced from Statistics New Zealand median population projection. As net migration continued trending upwards (Figure 13), albeit cyclically, our forecast of net migration was consistently below the outturns (Figure 18).

The continued improvements in New Zealand’s educational system, work conditions, and overall economic atmosphere, led us to believe that arrivals would be permanently higher relative to their long-term average. In other words, net migration will continue trending upwards in the long run. These factors motivated the Treasury to review the migration forecast using other methods.

Figure 18 - Treasury’s historical forecasts of annual net migration2

Figure 18 - Treasury’s historical forecasts of annual net migration

Source: New Zealand Treasury

There is no consensus regarding the optimal method for forecasting migration. Each method has a different purpose. Figure 19 plots some of the forecasts of several institutions including the Treasury. Sense Partners forecast is based on the average of five models that account for the economic drivers of migration such as wage differentials and real exchange rates.3

Statistics New Zealand projections are based on the long-term average of historic net migration. The projections are updated every three years. MBIE’s forecast is updated quarterly and relies on certain assumptions about the future movements in the component variables of net migration as well as their historical trends.

Figure 19 - Annual forecasts of net migration by institution

Figure 19 - Annual forecasts of net migration by institution

Sources: Statistics New Zealand, MBIE, Sense Partners, and the Treasury

What is the current migration forecast?

The Treasury forecasts net migration to reach 25,000 by June 2022. Our current end of period forecast is 10,000 higher than forecast in HYEFU 2017 (Figure 20).

Figure 20 - BEFU18 vs. HYEFU17 net migration forecasts

Figure 20 - BEFU18 vs. HYEFU17 net migration forecasts

Source: The Treasury

Due to the recent trends in net migration (Figure 13), we expect net migration to gradually decline within the forecast horizon, but not to long-term averages. On the other hand, we believe the forecast of Sense Partners may be a little too strong. Our best judgement is that net migration will lie between the forecasts of Sense Partners and the projections of Statistics New Zealand.

Departures of non-New Zealand citizens have driven the fall of net migration over recent months. We expect this outflow to increase as some of the record high arrivals of non-New Zealand citizens in recent years start to leave. We expect non-citizen arrivals on work and resident visas to decline in the medium run compared to their current levels. Data in 2018 show modest declines in resident and work visas.

There is a large degree of uncertainty surrounding the flow of New Zealand citizens to Australia. Relative economic and labour market conditions remain important in driving trans-Tasman flows. We anticipate an increase in New Zealand departures to Australia but not to the extent seen recently.

What do the changes for migration assumptions mean for other variables?

The new migration forecast assumption adds almost 20,000 net migrants over the forecast period relative to HYEFU 2017, mostly in the latter years. The increase in population feeds into higher house prices, which boosts growth through higher consumption (wealth effects) and residential investment. The increase in residential investment results in more hiring and stronger business activity. The changes to our forecasts due to the change in migration assumptions are fairly small.


  • 1. This note refers to “permanent and long-term migration” where the migrant stays or intends to stay for 12 months or longer.
  • 2. BEFU stands for Budget and Economic Fiscal Update. HYEFU stands for Half Year Economic and Fiscal Update.
  • 3. Sense Partners study was commissioned by the Treasury to provide alternative population and migration forecasts. The report is available here.

This is a re-post of the Special Topic in the Treasury's Monthly Economic Indicator report.

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Neither Treasury nor any other organisation can predict how many Kiwi citizens will choose to emigrate. Look at past years: a totally unpredictable number and short of closing our borders like North Korea no way the govt can control them. A swing of maybe 50,000 on the annual figure and it will be caused by Brexit and Australian immigration policies not ours.

The figure that matters is not the kiwis coming, nor the kiwis going nor the holders of work visas: it is the number of new permanent residents. Once they are in they are in. And that figure is about 45 to 50 thousand per year and has been for a decade and nothing the govt has done is changing it. A per capita figure triple the number in the UK or the USA (and that is Obama USA not Trump). So unless we get lucky and brain drain another 50,000 educated Kiwis to Australia our population will keep growing, our hospitals will get more overcrowded and we will all have time to think about it as we sit in traffic jams.

Forecasting is fun -"" net migration will continue trending upwards in the long run "". So they forecast an extra 10,000 immigrants which is about 3,000 homes or about $1,500million per year for housing infrastructure alone. Then add hospitals, schools, doctors and teachers plus various other public servants.

Many of the graphs (eg figure 15) are a waste of time since all they do is record movements at our airports but once arriving as say a student without leaving NZ they can become work-visa and then later permanent residents, citizens and leaving Kiwi.

The Treasury should produce two statistics: one for immigrants earning less than our average wage and the other for greater than the average wage. Very roughly the former is bad immigration that makes NZ poorer, holds down natural wage increases for the low paid so makes NZ less equitable and is the main source of the rorts and corruption that are sabotaging honest Kiwi businesses. The latter may be good for NZ giving us extra teachers and doctors etc.

You are correct Lapun. These "immigration" statistics are lies. A few turnstiles at each airport would show the picture much more truthfully. I would like one queue for citizens and another for everyone else.

Net migration totally ignores cultural change and brain drain both of which actually do have effects on the economy.

It will be interesting to see if this years Census data reconciles with immigration stats.

I had not given cultural change much thought but you are right. Fortunately most immigrants are far more hard headed and pragmatic than the soft headed wishful thinkers who dominate the media and politics. Bring in another million and we will have a majority for lifting the drawbridge.

Census data on ethnicity is unreliable to. There are those who lie and then what is a 3rd generation POM or a 3rd generation Samoan going to fill in as ethnicity? And most of my son's 'Maori' friends are the result of what used to be called mixed marriages. So for the census ethnicity is whatever we choose it to be and that is far far better than it being assigned by a bureaucrat.

Immigration will steadily grow over the medium term after a small recent fall off.
International students (& their conversion to PR) will also keep growing over the medium term.
NZ = a stable society with human rights and relative freedom built on a strong heritage.
India/China/Korea etc = billions of people seeking all the things that NZ has as a birthright/heritage (a heritage NZ is in danger of losing/devaluing).

With all the discontent in the rest of the world NZ will continue to be a desirable place for people to migrate to. It is likely to continue the trend of attracting the wealthier demographic.

People talk of a brain drain but I disagree. I see a lot of very bright people migrating to NZ. Yes a lot of intelligent Kiwi's leave to gain experience/skills and then come back. That is a positive in itself.

I don't see the figure falling to 22k even with Government intervention.

More tourism leads to more migration to NZ.

Certainly some bright immigrants (eg my family) and I make an effort to chat to all the immigrants I meet (supermarket checkout for example) and they invariably seem pleasant, friendly and keen to be Kiwis. However it is the latter - immigrants willing to take any job at any wage who are sabotaging my adult children who are looking for work. The fraction of immigrants who are 'skilled' is 27%; obviously many of them have talented family but not all. So we are continually importing 3rd world wages and various rorts and worker exploitation.

Bright but too rarely brilliant; where are those Indians with PhDs in IT and Engineering going? California and the UK but not NZ.

Employers in Singapore, UK and the US don't hesitate to pay a premium to employ top talent from overseas and often they get the bang for their buck in terms of long-term value.
We seem to have trouble both attracting world class talent from abroad and retaining homegrown experts, as a result of our poor reward and recognition culture.

I spend far too much time writing comments against NZ immigration. See page A9 of today's Herald for 440 hospitality operators who say 'exploitation is rife' with stories of workers being threatened by bosses and it being quite common for workers being made to pay for their jobs. Makes me as mad as hell - not sure whether it is the exploitation or the ignoring it that angers me most.

However you are right about getting the best people to NZ. Our Immigration rules makes it far too hard for the really exceptional - it is not the paperwork or the cost but the delays in processing. For example if a reputable employer like a major hospital needs a replacement surgeon immediately then they ought to be able to put a large sum of money in escrow and have a new foreign surgeon working within a couple of days. The paperwork, police checks, health checks etc can be carried out later and then the money in escrow returned.

Pretending immigration is like the rain forecast is stupid. It is much more garden hose which can be switched on or off or anywhere in between. If your garden is flooding you don't complain about the rain when you have the sprinkler on 24/7.

1) This is insane - NZ needs a controlled sustainable immigration policy aimed at assisting the maximization of gdp/capita

2) Immigration is something we can control and use to our advantage rather than it being some extraneous monster that cannot be forecast

2) NZ can easily control the total 12 month immigration rate if it really wants to:
a) Set a target that maximizes gdp/capita growth
b) Set the mix of skills & visa types needed to assist a)
c) Subtract how many NZer's leave to give the net inflow required
d) Adjust the points needed (and/or payment needed) to enter the country to achieve a)
e) The timing of when a visa becomes valid can also be managed to help achieve the immigration target.

3) Give it to the Reserve Bank to manage along with the OCR - the politicians obviously cant manage it given the infrastructure deficit issues currently faced in Auckland.