Opinion: With the housing market already under pressure, the country can't afford to be complacent about rising net migration gains

By David Hargreaves

Perhaps it is time as a country that we started getting more than a little bothered about the accelerating rate of net migration growth.

Mind you, in fairness, the reaction of some interest.co.nz readers to analysis by Westpac economists suggesting that annual net migrant growth may reach 33,000 next year implies that at least some people are bothered already. A bit of number crunching suggests they are right to be concerned.

After all, the last thing we need as a country - when we are grappling with a perceived shortage (about 30,000) of houses in our largest city Auckland and with the resultant upward pressure on prices - is to be willingly pumping up the population and putting more pressure on the infrastructure.

Remember also, that a large proportion - often around half - of immigrants settle at least firstly in Auckland. So, the biggest city is at the sharp end of any population pressures.

Official migration figures from Statistics New Zealand for September showed that in the 12 months past we had a national net migration gain of 15,200.

Now that's not spectacular.  As some means of comparison, the highest net inflow ever recorded was 42,500 in the 12 months to May 2003, while the biggest ever net outflow was 43,600 in the July 1979.

But these figures can move around pretty quickly. Of greater immediate significance is the fact that in September we saw the biggest monthly net gain of migrants in 10 years, according to Statistics New Zealand's seasonally-adjusted figures.

There's more, however. If you look at the unadjusted figures for September they show an actual net gain of 4194 people, which is the second highest ever total for a September. The only higher September figure was reported in 2002 - during the record busting period that saw 42,500 net migrants in the 12 months to May 2003.

Attention is generally paid to the "net" figures, the figures you get after subtracting the outbound from the inbound migrant figures. For the most part that is fair enough, since the net gain or loss is what has the impact on the population.

However, maybe at the moment we need to be looking more closely at both the arrivals and departures figures. Not just the net.

For example, the general market observation from economists about the current upswing in net migration gains is that this is pretty much due to few Kiwis jumping on planes and heading off.

Certainly, that is a big part of it, but it obfuscates a bigger and telling picture.

Most ever migrants

In fact the 24,784 migrant arrivals in the September quarter just past were the most ever in a September quarter.

The 15,895 migrant departures in the same period were far from a record low, with lower totals recorded for the September quarters in 2009 and 2001-2003. Imagine if the numbers of departures dropped further. What would happen?

By just focusing on the net figures it is easy to overlook the fact that apart from the early 2000s, when arrivals were at record highs and departures were at relatively low levels (lower than now), there has been a trend of rising immigration and high levels of emigration - so the two have in part balanced each other out.

But must we presume that massive numbers of Kiwis will always keep heading overseas to live permanently? Yes, that has tended to happen historically, but it's also true that the numbers going in the past few years have been much, much higher than they were for example in the 1990s.

Staying at home

What if more Kiwis do start staying at home longer term?

The only time since the early 2000s when we saw net migration figures blow out - to a net gain of more than 20,000 in a year - was in 2009 when serious numbers of Kiwis did stay at home after the Global Financial Crisis.

However, once normal service was resumed off they all went again.

But of course most of these people have been going to Australia. A jump across the Tasman has long been the safety release valve. If things are going badly in our back yard then we hop over the fence.

Australia for its part has had a charmed economic run in recent years largely involving, as The Economist colourfully but aptly put it recently, digging up the country and selling it to China.

A new era?

But are we now on the cusp of a new era when perhaps the buoyancy of the Australian economy can no longer be assured longer term?

That's absolute conjecture of course and you have to imagine there will always be some appeal for Kiwis going to a much bigger country that is just close by.

But the point is, what if the current reduction in number of Kiwis heading off overseas actually stays this way for the next three to five years?

Those net migration gains could get pretty chunky.  If you extrapolate out the current migration figures and trends to factor in the normal strong seasonal inflows, particularly in the first quarter of the year, it is easy to see Westpac's 33,000 net gain figure coming to fruition next year. In fact, I wouldn't be surprised if we don't see that record 42,500 inflow get a nudge.

Bad news for housing

For the housing market, this would be very bad news.

The Reserve Bank, which its trying to rein in the rampant housing market, has already noted the rising migration figures.

Dare I suggest that the Government should be doing more than noticing them.

I certainly would not like to see this country start taking a Draconian stance on immigration. But equally, if the infrastructure's already groaning then it doesn't make a lot of sense to keep adding to the load - when you do have the power to do something about it.

The current migration situation needs watching closely. And if action is needed. It should be taken - sooner rather than later.