By Bernard Hickey
Annaul net migration hit an 11 year high of 41,000 in July and looks set to surge to new record highs later this year as New Zealanders come home from Australia and more students arrive on working visas.
Economists said the stronger-than-expected figures suggested net migration was headed for 50,000, which would be well above the scenarios used by the Reserve Bank and Treasury in warning of higher interest rates.
Treasury forecast in May that a rise in net migration to a peak of 41,500 by the end of this year would push up the 90 day bank bill rate by around 100 basis points more than its main forecast for a peak of 38,000. The Reserve Bank forecast in June that a rise in annual net migration to 45,000 from its central forecast for a peak of 37,000 would push up the 90 day bill rate by around 50 basis points above its central forecast by late next year and push up house price inflation by around four percentage points.
Statistics New Zealand reported seasonally adjusted net migration of 4,540 in July, which was the highest monthly figure since the 4,700 that arrived in February 2003.
This took annual net migration to 41,000, which was the highest net gain since the 41,200 seen in the year to August 2003. It was up from net migration of 10,600 in the previous year to July 2013.
Economists had forecast a monthly figure of around 4,100 and an annual figure of around 40,000.
The Reserve Bank is watching net migration closely because a surge can boost inflationary pressures and the housing market. The New Zealand rose around 5 basis points to 83.7 USc after the result, having fallen sharply earlier this morning on renewed talk of an early increase in US interest rates.
Statistics New Zealand said the difference between the net gain in the month of July 2013 of 2,010 and 4,500 July 2014 was mainly due to more non-New Zealand citizens arriving (up 1,200) and fewer New Zealand citizens leaving for Australia (down 800).
"In the July 2014 year, migrant arrivals numbered 102,400 (up 15 percent from 2013). Migrant departures numbered 61,400 (down 22 percent)," Statistics NZ said.
In the latest year, New Zealand had a net loss of 7,300 migrants to Australia, down from 29,200 a year earlier. Just a net 79 New Zealanders left to live in Australia in the month of July, down from 1,121 in July 2013.
"Net gains were recorded from most other countries, led by India (7,700), China (6,600), the United Kingdom (5,500), and the Philippines (3,100). Compared to the July 2013 year, the biggest increase in visa type for arriving migrants was student visas (up 4,800). Migrants from India and China most commonly arrived in New Zealand to study, while migrants from the United Kingdom and the Philippines most often arrived to work," Statistics NZ said.
Immigration Minister Michael Woodhouse and Economic Development Minister Steven Joyce announced in October that full-time students would be able to work during course breaks (rather than just in summer), doctoral and masters students could work full time and English language students would be able to work part time.
Economist reaction
Westpac Senior Economist Felix Delbruck pointed to the rise in annual net immigration across the 40,000 threshold as significant.
"The major factor driving this migration cycle has been movements by both New Zealanders and Australians across the Tasman as the Australian job market has cooled - New Zealand departures to Australia are at levels last seen in 2003, while arrivals of Australians are at multi-decade highs. In addition, in recent months there has been a noticeable lift in migrants coming in on student visas, likely reflecting an easing in work restrictions for foreign students late last year," Delbruck said.
"We don't expect Australian job prospects to improve decisively before early next year, so this migration dynamic could continue for a while - we now expect net immigration to peak around 50,000 early next year," he said.
"Along with recent falls in fixed mortgage rates and a revival in low-equity lending, we expect this migration surge to support a revival in the housing market over the next year or so. However any resurgence in the housing market is likely to be temporary - by next year we do expect job prospects in Australia to improve, which would cause net migration to reverse. And the Reserve Bank is also likely to resume hiking the OCR next year, which will lead to renewed upward pressure on mortgage rates. As mortgage rates continue to rise, we wouldn't be surprised to see house prices actually fall in the second half of the decade."
ANZ Senior Economist Mark Smith also said net migration was on track to approach 50,000 by the end of the year.
He said the increase in net migration would increase demand, but it was also dampening wage inflation, which would help the Reserve Bank leave rates on hold through the rest of the year.
"Despite the boost to demand provided by more migration to our shores, we note that migration gains are also adding to the economy’s potential growth rate and are helping to contain wage inflation," Smith said.
"While the next move in the OCR is likely to be up, a benign inflationary backdrop will provide the RBNZ with scope to keep OCR settings on hold for the remainder of the year," he said.
Political reaction
New Zealand First Leader Winston Peters said the Government should hang its head in shame over jump in net migration, given there were still 140,000 unemployed and a housing crisis in Auckland.
“The pressure on housing, jobs, our hospitals, schools and our welfare system from a near record 41,000 people settling here in the past year is unbearable and will squeeze these services for hardworking New Zealanders," Peters said, adding a 4,800 increase in student visas to 90,000 was making life more difficult for local unemployed.
“When the National government gave foreign students work rights they increased job competition and allowed ‘study” to be used as a means to permanent residency," he said.
“Where is the export education policy now when it is our economy that is paying for foreign students to work here? The government is not monitoring immigration at all – it has an open door policy and its contributing to the fastest rate of population growth for over a decade."
(Updated with more detail and economist reaction, background on Treasury and Reserve Bank forecasts, background on student work visa changes, and reaction from Winston Peters)
Net long term migration
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38 Comments
This is a BIG number ....
Assuming they are all new arrivals , 50,000 new migrants is quite scary actually , thats about 137 new people every 24 hours , or nearly half a dozen new people per hour , 24 hours per day and night relentlesssly arriving here .
Lets hope they bring money and skills and a good honest work and business ethic .
Just wondering why should student class visa holders be considered migrants ? First of all NZ needs to have students from China and India come in ..as international students are big money spenders on fees etc and earn very limited amounts on limited time allowed ..they are not the ones who will compete with local residents for either jobs or houses ..such so called migrants should be very welcome as they are business customers of NZ education industry ...If they manage to stay on as permanent residents on immigartion NZ terms then why not ...NZ only gains from them ! Only people already holding or granted permanent resident status and coming in should be counted towards net immigartion inflow to get better picture of how the competition for local people is increasing and where ...
Most of these tertiary students will be awarded a job search visa of one year immediately following their graduation. If they can secure permanent work in their field at the right level within the one year window then they are likely to be successful in their application for permanent residency. For many, study is a pathway to their desired residency here.
So the tertiary student ticks 2 boxes: income to the university at 16 to 18k per year, then a filtered immigration pathway to fulfill dept immigration goals.
agree international students by themselves are good for nz.
but same thing was the case during last boom in 2002-2003, a lot of international students, and house price and inflation rose dramatically during those years and the couple of years that followed. Not so much the student, but possibly the money and asset buying apetite of the students parents that play a role here?
Updated with this background:
Treasury forecast in May that a rise in net migration to a peak of 41,500 by the end of this year would push up the 90 day bank bill rate by around 100 basis points more than its main forecast for a peak of 38,000.
The Reserve Bank forecast in June that a rise in annual net migration to 45,000 would push up the 90 day bill rate by around 50 basis points above its central forecast by late next year and push up house price inflation by around four percentage points.
cheers
Bernard
A Policy question for the Greens about housing these 50,000 new migrants in what could be between 10,000 and 15,000 housing units or apartments ?
Under their tax policies published yesterday , the Greens are planning to remove all investor incentives to provide housing rental stock by private indivuduals ( ringfincing losses ) , and further discourage investment in housing through Capital Gains Tax Quote " at the marginal rate "
Thats the stated policy and Labour are singing the same Hymn .
How , then, are they going to house all these migrants with no private equity providing rental stock?.
Is Housing New Zealand going to take on the risks and become NZ's biggest property developer , using taxpayers money ?
The quick and dirty solution is to ring-fence newly arrived property buyers
If they wish to buy any property within 50 km radius of the CBD they should first be required to build a new-build, minimum 3 bedroom home, somewhere outside a 50 km radius.
Once built, they can immedialtely sell it and relocate to their preferred location
You would see some very nice bargains coming on the market
Wow Bro thats not a very Green opinion .... these migrants are not a flock of goats , we cant go ring-fencing them and ring-fencing everyting else willy nilly.
When a migrant arrives here ,and is given a PR Visa , he has the same rights as you and I as citizens , we cant treat them as second class .
Ideally some policy to limit population growth perhaps. within the next 50 years or so world populations in the developed countries will be dropping quite quickly so transitioning to an economic model that dosn't require constant growth now will put us ahead of the curve.
@ Peak , thats a reasonable suggestion , but it does not solve the immediate issues we face of housing so many new migrants .
And , read Bernard's article carefully , new migration at this level is going to lead to higher interest rates , making home ownership even more expensive.
We are making things worse by doing the same things over and again and expecting a different outcome
as there would be less investor demand for housing, we would expect housing prices to be lower.
This frees up housing for residents that are currently renting and locked out of ownership by high prices.
This frees up rentals for temporary residents.
So what we would see is a higher rate of ownership and smaller number of renters. The numbers renting would be less diverged from the number who wish to be renting.
Don't you know that a CGT is a magic bullet that will heal the poor and all the other ills of this world with no un-intended consequences at all...
What the Labour/Green's don't want you to know is that it will be easily avoided by PIs because it excludes the family home so won't gain even a fraction of the tax income claimed. PI's will also move from to a buy and hold strategy and wait for a return of a National govn who will remove the tax. In those three years you'll see a fraction of the sales by investors that usually occur, resulting in a dramatic shortage of supply and dramatically increasing prices. So in my opinion the Labour/Greens saying the CGT will lower prices is disingenuous as it will do the exact opposite, it's simply their attempt to pay for their $6b+ election promises.
To resolve this I predict they will extend the tax to all houses including the family home so next time you're planning to move or upgrade your house you'll need to budget 15% (say 100k) to give to Cunliffe for his election promises.
Thank you, yet another reason why a CGT won't raise even a fraction of the extra revenue needed to pay for the Labour parties proposed $6.8b spending increase. Not to mention the extra spending promised by the Greens, Internet/Mana and Winston. I've heard figures in the range of $28b in left wing election promises. The tax is also forward looking so any past gains are not taxable meaning there will be no income at all for some time and there will also need to be capital gains under the Labour/Greens govn. Which of course creates a conflict of interest because a Labour/Greens govn will want to see house price inflation, so they can tax it, so they can pay for their election promises. Right there puts a lie to their election mantra, "we won't let house prices keep rising and thus make houses more affordable" if they do that they won't make any CGT income and wont be able to pay for their elecction promises.
If Labour are elected we're either going to be broke or there will be a lot of broken promises.
FYI Updated with student work visa changes.
Immigration Minister Michael Woodhouse and Economic Development Minister Steven Joyce announced in October that full-time students would be able to work during course breaks (rather than just in summer), doctoral and masters students could work full time and English language students would be able to work part time.
A good thing about migrants is they are delighted to work for the minimum wage, so it helps us keep the cost of wages down, especially in the farming , manufacturing and construction sector .
Some of them come with good skills from places where the wage rate is $1 per day
Hey Andrewj , you are quite correct and I was just being flippant , as I often am , trying to get some response from the lefties .
The real point is that while some migrants are wealthy , many of the migrants who come here find work as cleaners , painters , gardeners for landscaping contractors , petrol station tellers , hairdressers ,fruit pickers , two dollar shop assistants , etc are not adding any real skill-sets to the economy where we have 140,000 unemployed .
Meh , precisely , thats why people on the left should be annoyed as much us us old rightwing buggers .
I am not in favour of being swamped by new migrants , but I guess History repeats itself , and this is what Maori folk felt when the Pakeha started arriving here and taking over .
More than a little bit annoyed
Bingo!
In many cases the Chinese who are sending money out here to buy dwellings have aspirations to have residential qualifications. They turned away from the US because President Obama passed legislation that requires people gaining a US green card to disclose all their sources of global income.
http://www.businessspectator.com.au/article/2014/8/21/property/how-obam…A surplus of skilled migrants will put downward pressure on local wages. Placing our companies in better positions to compete on the global market. Hence more profit to put back into our economy . That's called GROWTH!
This is good news for companies, good news for our economy and good for our nation.
What happens when the wheel turns and the film star economy stumbles. People won't be needing the curry or chinese takeaway then. (Mind you we will be using the 2$ shops big time.)
Recently up at Albany mall. Quick review in the eating hall showed most of the largely ethnic eateries were using an open till system - nothing being recorded for the poor old tax man. Is this normal or something the wide boy immigrants have introduced and have the gumption to get away with?
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