Kiwibank economists say the absence of a migration-led boost to consumption in NZ points to a "weaker inflation impulse" than might have been expected from a fast-growing population.
In their latest First View publication, Kiwibank chief economist Jarrod Kerr, senior economist Mary Jo Vergara and economist Sabrina Delgado, point to the fact that in 2023 the annual money remittance outflow exceed $1 billion for the first time.
According to the most recent Statistics NZ migration figures, the country had a net migration gain in the 2023 calendar year of over 139,000 people while inbound migrants totalled just over 250,000. This has led to a lot of talk and conjecture about what the ramifications may be for inflation - as more people vying for products and services could obviously potentially put upward pressure on prices.
But the Kiwibank economists are countering that view.
"Net migration surged in 2023. And more people means more demand. But migrants are arriving at a time when the economic undercurrents are softening," the economists say.
"High inflation and high interest rates dominate the environment. So, despite rapid population growth, retail trade has been softer than one might expect," they say.
Alongside tighter financial conditions, the rise in remittance outflows may also explain why consumption has underperformed, they say.
"The amount of remittances sent by NZ residents to overseas dropped 10% below pre-covid levels in 2021, but sharply recovered in 2023.
"Annual remittance outflows exceeded $1 billion for the first time in 2023.
"Undoubtedly, inflation is working behind the scenes. But the all-time high also coincides with the 2023 migration boom, specifically the strong migrant inflows from India.
"India has long-been the top recipient of global remittances. According to the World Bank, India accounted for 14.5% of global remittances in 2023.
"China and the Philippines are also among the top five. And it is migrants from these countries that make up the bulk of arrivals into Aotearoa."
The Kiwibank economists say that as migrants send some portion of their wages back to their home countries, it suggests weaker local consumption than otherwise.
"The absence of a migration-led boost to consumption points to a weaker inflation impulse than one might have expected from a fast-growing population."
Separately, the economists noted that a highlight of last weeks Stats NZ labour market report was seeing the way women’s wages have performed over the past 10 years.
"Average hourly earnings among women doubled in the last decade, up $12.91, while men experienced a 43% increase. It likely follows the wider dispersion of women within the labour market, branching out of low-paid occupations traditionally held by women.
"In saying that, nearly a third of all jobs held by women are in health care and education industries," they say.
They say the 7% rise in women's hourly earnings in the year to March was largely driven by the pay increases within these two industries. In the same period of time, men’s wages grew 3.8%, down from 6.2%.
"A slowing construction industry, of which men make up about 85% of the workforce, likely saw slowing wage growth. For now, discrepancies between the level of wages between men and women remain, but it’s encouraging to see an acceleration in women’s wage growth."
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