The Reserve Bank's picking that the immigration boom's plateauing: David Hargreaves has a crunch of some numbers

By David Hargreaves

It's probably not top of mind for everyone, but I can tell you (courtesy of Statistics New Zealand) that in August 2014 this country had a net inflow of 4695 permanent and long term migrants.

The point (and yes, there is one) of this pristine piece of information is that if this country (and we don't know yet) received more than a net 4695 permanent and long term migrants in the August just gone then we will have set yet another 12-monthly high for inbound migration, surpassing the record set for the 12 months to July of 59,639. Just in case anyone got stuck in the middle of that piece of logic; to work out the rolling 12-month total we'll remove last August's (2014) figures (4695) and replace them in the grand total with whatever the figure was in the latest month (August 2015). Hey, if the magic number in August 2015 was 5056 that would give us a nice even 60,000 for the year.

We'll find out from Stats NZ on Monday (September 21) if a new record has been reached.

I have a sneaky feeling that it WON'T have been. You see, July's inbound figures were particularly strong on the back of what's now an annual surge of student numbers coming into the country to take up courses starting in the second half of the year.

And I note with interest that the Reserve Bank suggested in last week's Monetary Policy Statement that the record-breaking immigration surge has now plateaued.

"Net immigration has been at record-high levels, and our view is that it has reached a peak in recent quarters. It is expected to ease over the projection. Migrant flows have added to both demand and supply capacity in the economy since early 2013. On the demand side, population growth has added to the demand for housing as well as consumer goods," the bank said. 

And further on in the document: "Net immigration remains strong, but appears to have plateaued over recent quarters (figure 4.6).

I've looked back and can't find the RBNZ so explicitly suggesting before during the current boom that migration has peaked, though it did say this in its June 2014 MPS: "With the outlook for labour demand in Australia expected to improve, the projection assumes annual net inflows peak in mid-2014 at 37,000 working-age persons, and then ease steadily for three years." 

Whoops. Though in fairness to the RBNZ, it DID include in that MPS document last year an alternative scenario looking at what might happen if the migration boom ran longer and stronger. And our central bank is certainly not even close to being the only organisation to fail to pick how high the peak was going to be. The fact is, if you go back a couple of years, nobody came close, to my knowledge.

Below are Stats NZ's figures for arrivals, departures and net migration in the June years from 2002 (during the previous boom) up to June 2015, which was of course a record for a June year and an all-time 12-month record before being surpassed in July by the new high-water mark of a net 59,639 migrants.

In the early stages of this boom several economists and commentators attempted to characterise it as being mainly about fewer Kiwis leaving (as indeed a mini net migration boom in the 2009-10 period after the GFC very much was).

Unquestionably the figures do show that more of the traditionally itchy-footed New Zealanders are staying home - principally because, heck our economy's not been doing too badly and, crucially, the usually ever magnetic (for Kiwis) Australia is for once looking on rather shaky ground economically.

But the figures also show that by historical standards there's a lot of people coming into the country.

So, cue another commentators' favourite - that the number of 'real' migrants is actually flat or shrinking and the figures are being 'wrongly' and artificially inflated by people here for short term work or to attend tertiary courses.

Stats NZ's breakdown of the arrivals figures for the past 12 months (shown below) would  on the face of it lend support to such an argument.

But what the figures possibly also show is that people are just doing it differently these days. A lot of people have clearly been attracted into the country to work on the Christchurch rebuild. They might stay after that work's finished. They might not. But the point is they will likely have the option, so you can't definitively say such people will be "temporary" migrants.

Likewise, it's very clear that large numbers of students are now coming to NZ with an intention to get full-time work after completing their courses, so while their visa might say 'student' the intent for many is 'resident'.

The extent to which the pattern of inbound migration here has changed is aptly demonstrated by the longer term break-down of the arrivals by-type figure in the next table down.

In terms of attempting to get slightly more specific information on the numbers of potentially short-term visitors becoming longer term residents, I had a look at the Immigration New Zealand website and specifically the figures relating to "resident decisions by year" over the past five financial years.

These indicate something of an upward blip though not spectacularly so. Immigration NZ says it approved 40,737 new residents in the year to June 2011, 40,448 the following year, 38,961 in 2013,44,008 in 2014, 43,085 in 2015 and 8212 in the first two months of the 2016 financial year.

The Reserve Bank has in the past talked about the potential strong inflationary impact of inbound migration. But the fact is this time around such impacts have not been visible - and it's clearly the changing nature of the immigrants that appears to have been a factor. Finance Minister Bill English conceded this week that the high number of student and working holiday migrants has helped depress wage inflation for lower skilled jobs. But he said he expected the migration cycle to turn soon.

Time will tell.

But if we do accept that the flow of net inbound migration has reached a plateau, does that necessarily mean it will now dwindle to nothing as it has in previous cycles? I really don't think so. I think we are in a new era and it is going to require a Government response.

Quite simply, if you look at the figures, the pattern of inbound migration is now very different.

Obviously the big variant in future is likely to be how many Kiwis keep staying at home. It is to be imagined that Australia will always retain some attraction, but until its economy starts to seriously pick up, thoughts of going there might be placed on hold. And will Australia necessarily bounce back that quickly? Economies can and do fall into holes that don't have easily accessible ladders. Think Japan.

Historic performance is by no means necessarily a guide to the future.

So, if the current pattern of more Kiwis staying at home remains in place for some time (and I think it will - I think we are talking five years at least) the key questions then become, will people keep coming in at the same rate and is this sustainable?

It is to be assumed (though I don't know this) that post the Christchurch rebuild the numbers of people coming here on work visas will decline.

But what about the students, many of whom appear to be coming here with thoughts of settling longer term for work?

This is a very interesting dynamic. The tertiary institutions need these fee-paying overseas-sourced students to help pay the bills, so the business of attracting students here is now a big business indeed.

So, on the one hand you've got a flood of offshore-based people coming into the country to help our tertiary institutions survive financially. But on the other you've got these self-same overseas people wanting to get jobs at the end of it. And what happens when the NZ job market turns down as is being forecast from about now on?

Then there's the not-small issue of the fact that many of the new migrants settle in Auckland, which is already groaning under the weight of a spectacularly misplanned infrastructure of historic origins. Stats NZ figures show that of the 59,639 net migrants into the country in the 12 months to July, 27,395 of them stated they would be settling in Auckland. The Government is now moving to encourage people to settle in other regions, and it needs to. That's overdue.

But I reckon that with an economy that's now losing steam, something is going to have to give. The migration figures may have hit a plateau, but I think the days when the Government could happily let migrants pour in knowing that their numbers would be offset by thousands of Kiwis flying the coop are behind us.

Sooner rather than later the Government is going to need to seriously look at our whole immigration policy and the policy settings.