Westpac economists see unemployment hitting 6.5% next year - in part driven by the high rate of net migration.
However, they are forecasting that the large inflows will gradually taper off - and this could ultimately lead to disappointment for property speculators betting on continued large capital gains driven by population growth.
The net gain in population through migration exceeded 60,000 in the year to August, which was a new record high.
In An Update on New Zealand's Migration Outlook Westpac senior economist Felix Delbruck says net migration "could stay high for a while yet", even as the New Zealand economy slows.
"In particular, until the malaise around Australian job and earning prospects lifts, a renewed exodus of New Zealanders on the scale we saw back in 2011 looks very unlikely.
"This is a double-edged sword for the economy. It will support growth across New Zealand’s regions, but will also limit migration’s ability to act as a ‘safety valve’ in an economic downturn. We expect unemployment to rise to above 6% over the coming year, and continued high population growth is one of the reasons."
As of June, according to Statistics New Zealand, the rate of unemployment was 5.9%.
Delbruck said the current rate of population growth "does look unsustainably high".
"Most recent offshore migrants have come to New Zealand on temporary visas, and many will return home over the next few years. For those that intend to settle in New Zealand long-term, doing so will depend on their ability to obtain work, affordable housing, and a residence visa – all of which are in limited supply. And the number of New Zealanders leaving for Australia will rise eventually, as the Australian economy recovers.
"That suggests that beyond the next year or two, it’s worth planning for a return to historically more normal levels of net migration – closer to 15,000 a year than 60,000."
Delbruck said such a slowdown wouldn’t eliminate the need for a "significant further ramp-up" in building activity in Auckland, which to date hasn’t been sufficient to meet even average rates of population growth.
"But it could come as a surprise to those who have been banking on recent high rates of population growth continuing for years to come.
"...Auckland property prices have been showing increasing signs of being driven by speculation on future capital gain. A migration slowdown could be one factor leading to doubts that Auckland house prices will keep marching higher...
"...We see the drivers of recent house price increases as largely speculative – the degree to which prices have risen can’t be explained on the basis of existing housing shortages alone.
"In our view, a key driver of this speculation is the view that rising demand for housing will be met by increasing intensification of existing land, driving land prices up. Along with a slowing economy, a slowdown in migration could challenge property investors’ confidence over the next few years."
Delbruck said that in the near future, a significant rebound in the number of New Zealanders leaving for Australia looks unlikely.
"The mood in Australia remains deeply downbeat. And though that will change eventually, a renewed exodus of New Zealanders on the scale we saw in 2011, when the mining boom was in fullswing and quake-shocked Cantabrians were leaving New Zealand, looks very remote.
"We’ve assumed that the net outflow of New Zealanders will stay low through 2016, rising to a more normal 24,000 a year by the end of the decade."
The number of overseas migrants coming in now "appears to be reaching a peak, and with so many on temporary visas, the number leaving should start rising fairly soon as their visas start expiring", Delbruck said.
He said one constraint for migrants was the approval process for residence visas, which favours applicants with existing employment in New Zealand – "and finding paid work will become harder as the economy slows".
In addition, Delbruck said, Immigration New Zealand’s residence approval targets have been essentially unchanged at 45,000 – 50,000 a year for more than a decade now, and are well below the current net inflow of foreign migrants.
"So if the net inflow of foreign migrants continues at its current rate of more than 60,000 a year, we’d expect a growing waiting list of frustrated residence applicants to result."
He said a second potential constraint was "physical". Westpac estimates that Auckland has the capacity to provide about 11,000 extra dwellings a year – enough to house an extra 27,000 people a year.
"But Auckland’s population grew by 34,000 in 2014, and probably even faster this year. We see this as unsustainable – the resulting housing shortage would eventually see people leaving, either to other parts of New Zealand or offshore.
"For these reasons, we expect a fairly sharp slowdown in net immigration of foreign citizens over the next few years – to about 41,000 a year, which would be consistent with residence approvals maintaining last decade’s average of about 45,000 a year.
"Assuming that Auckland continues to receive a similar share of population growth as in the past, that slowdown is also consistent with the 11,000 houses a year we think the city can feasibly build.
"All in all, this implies that net migration will remain close to 50,000 next year, but slow to less than 15,000 by 2018.
"By the standards of previous migration downturns – notably in 2011 – this is clearly a ‘soft landing’."
38 Comments
Migration cannot have "no consequences' , adverse or otherwise .
Newton's Third law of Motion may be applicable to this migration issue .....FOR EVERY ACTION THERE IS AN EQUAL AND OPPOSITE REACTION .
Migration has led to demand for housing , and wealth for us .............. but it comes with consequences , sometimes unforeseen ones
Physics
And with the benefit of hindsight this migration policy of ours has been plain dumb , we have enough taxi drivers , $2 shop owners , burger flippers , fish fryers , service station cashiers, painters , hairdressers and manicurists .
We actually don't need any more
The new ones arriving here will not find work and may become a burden .
Who, through their aggressive driving, drive up the speed on our streets to unsafe levels and, when delivering, leave their diesel engines running and spewing out dangerous particulates. Why can't they shut their vans off when delivering? Can't be that much time loss to restart nor that much starter/battery wear and tear. And if left running more than 20 seconds, net fuel wasted as well. No matter, there's an infinite supply of diesel as we all know...not.
A history lesson
John Key Tastes Australia's bitter pill
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11525392
Read this article - the reason Australia closed the doors to New Zealanders in 2001 - although there were 500,000 kiwis living in Australia it was costing Australia $1 billion a year (in 2001 dollars) for kiwis unemployment dole payments - kiwis were flooding to the Gold Coast for the sun, sea and surf and going straight on the dole
What is worth noting is Australia knew exactly how much it was costing them because of the knock-for-knock reciprocal payments system - when Howard asked Helen Clarke to pick up the $1 billion tab she refused
The question that should be aired is how much of the current cost of unemployment NZ welfare payments is attributable to new arrivals within the past 5 years, 10 years, now receiving welfare
$2000 per kiwi. That's a bargain. How much are we forking out here to pay for the 350000 receiving various entitlements?
Of the 60,000 odd immigrants arriving I would like to see a lot more data on where they are coming from, age, and profession before passing judgement.
Finaly a certain degree of unemployment is not necessarily a bad thing. It's what a country selects it's wage pool from
5% unemployment is considered as full employment by most countries. it keeps wage inflation in check as it has enough able people in the pool competing for jobs.
it is the price that we pay to have that pool of workers on standby that is the brunt of arguments amongst the politicians
uh, no, 3% I would have said, do you have a URL on that 5%? The problem is that number is of course overall, so amongst skilled workers with 5% overall their rate could be 1~2% creating wage inflation for them, meanwhile the unskilled could be say 10% to give that average 5%.
It is an interesting right wing concept ie keeping ppl purposely un-employed in order to keep wages suppressed, yet those same right wingers get upset if ppl are actually on the dole "unable to find work". I guess their thought on that ppl should try harder and be prepared to work for less thus actually pushing down wages. Meanwhile that % of ppl unemployed are not consuming, saving etc, or with less money unable to spend as much and other will be paying more tax so will have less to spend, hardly a great outcome for businesses ie less ppl buying their product.
So is it a good idea to have ppl un-employed? how does that work mentally for those ppl left with no job? cant be good.
agree ST - economics 101.
Having said that what is the true unemployment rate here? our tax system has become so convoluted with half the populous receiving some sort of welfare top-up, that the measure has become somewhat meaningless.
Our UE rate doesn't seem to vary much between say 5% at the best of times, and 7% when in recession.
I would hazard a guess that another 5-10% are unemployable meaning our actual rate could be anywhere between 5% and 17%
Just saying
The only reason I can find that Key could possibly have for allowing such ridiculous immigration levels is to get as many newly voters as possible to help him change the flag!!
Apart from that, pumping up house prices to reward his constituents who were smart enough to own multiple properties, and punishing Labour voters on minimum wage jobs could be other objectives...
Clearly Key can not see more than a few months ahead and has zero foresight or ambition for NZ (other than to wreck it).
High unemployment and crashing house prices together with near zero interest rates - here we come...
Good work Nats for all the hating and wrecking...
Actually Basel just how many of them who are prepared to get off their buttocks and vote is another question.
Renters, students, unionists, blue collar workers, unemployed, minorities, Maoris - all natural labour voters but how many bother to actually vote? Is there any surprise National have no interest in making voting compulsory as per Aust? http://www.radionz.co.nz/news/political/245798/compulsory-voting-'not-d…'
At the last election only 78% of us bothered to vote. If anyone commentating on this site didn't vote then STFU.
There you go - in black-and-white - it's quasi-official
Westpac estimates Auckland has the capacity to provide (about) 11,000 new dwellings a year – enough to house an extra 27,000 people a year. But Auckland’s population grew by 34,000 in 2014, probably faster this year. This is unsustainable – newcomers are taking all the benefit of all new-build additions to housing stock, while at the same time increasing the housing shortage
Told you so - here
http://www.interest.co.nz/opinion/78006/david-hargreaves-sees-likely-ne…
Its the area under the graph, i.e the area of the grey shaded bars above thats important as that represents the net number of people being added to the population. From westpacs prediction it looks like close to twice the number of people are coming in during this boom than the early 2000s boom, and thats if they're right about it peaking now/very soon from now. Draw the graph with another 2-3 years going at 60k net gain p.a and see how big the area under the graph is.
Hard commodity cycles (Aussie) take longer to turn around than softer commodities (NZ/dairy), so I wouldn't be putting too much money on the exodus to Aussie returning any time soon to take pressure off the net immigration figures, and there is a high likihood with house prices continuing to rise that the construction section will soak up a lot of the unemployment making the high inflows of immigrants potentially longer lasting than most predict.
Even if there's higher unemployment, a cooling economy and high house prices the question would be immigrants must ask: is NZ or home country the more attractive place to live and raise a family? With the world the way it is today in many places NZ has some unique benefits.
And what to do in the future if this ever happened
http://www.stuff.co.nz/business/72810035/40pc-of-new-zealand-jobs-could…
Its migration which created this economy from $5 Billion to $180 Billion in 50 years!! If you want to bring students and make $10 k per student, kiwis are happy.if they want permanent residence then Kiwis don't like that? If migrants invest in New Zealand, kiwis are happy, but if migrants buy houses kiwis don't like that. If migrants buys cars, increase tourism, kiwis are happy, but if they make accidents, kiwis not happy.
Inflation, not migration covers the first point.
Migration should benefit not take away.
A UK trained GP moving to Balclutha benefits NZ. A Japanese trained engineer moving to Wellington benefits NZ. An American entrepreneur moving to Queenstown benefits NZ.
Does an unskilled taxi driver moving to Manurewa benefit NZ? Does a take away restaurant worker moving to Henderson benefit NZ?
Pretty simple really. Just what the hell is currently going on???
Very elitist view there Chris_J.
Lots of people benefit from taxi drivers in Manurewa and fast-food workers in Henderson. Those jobs exist there and people pay the workers to do them and they make a profit. Mutual gains from voluntary exchange.
If the workers didn't do them who would?
You?
UK based company bought 26 Shell gas station, Japanese company bought CHH, Chinese company bought farms, Indian company bought land and building houses here, American company bought vine yards. Each community has good and bad people. But my problem is 1 bad person can make whole community bad? Is
it justifiable? Or racism? We want to sell or export our products to all these countries. It's give and take. We take their migrant and sell our products there. It's called trade deal. Which make this country prosper.
I thought trade was: we sell you products, you sell us products.
You're describing something else, maybe a takeover? You sell us products, then use that money to buy our assets that used to produce goods that we used to sell to you.
Sounds more of a dead end than free trade...
Here in NZ population is 4.5 million. What big countries can sell? Out of 4.5 million, May be 2 million got spending power. Now in their small cities, population is more than 2 million. Plus the geological position of New Zealand is not very good. Big countries can't afford to sell their goods (except China) because of transportation and small volumes. So big countries won't be benefited by selling here. Secondly New Zealand need young migrants who can work and pay tax. Because we have averagea age is 37. Otherwise it will create same problem as Japan where more people on social security.
Third we in New Zealand need big investment for infrastructure. Only Harbor bridge need 2 billion to repair! Or tunnel cost is $5 Billion. Where the money will come?? That's why, this country needs more migrants and investment to prosper. John Key is on right direction.
That is a very confused comment. Countries don't make decisions where to sell their products, individual businesses do, and of course the decision where to sell is based on the price the product sells for in the end market, not just the cost of getting it there.
So of course it's perfectly economic to sell MacBooks or iPads here even if we had a population of just 50,000 people! Our population size is really quite irrelevant.
The argument about needing more taxpayers to pay for bridges or tunnels is bizarre. More migrants cause more need for infrastructure, any benefits are generally well over stated.
Just one other point, I think you meant NZ's geographical location. It's geological location is the same for as for the rest of the earth ie the anthropocene surface.
To CJ I phone 5S in US is $200. You should know the price here. $600 minimum. That's what happens when geological position and population matters. Petrol price in Australia is $1.31 if you calculate in NZ dollar it is $1.42. Here it is $2. Why? Even you check milk price which is produced here. Same milk in Canada $1.25 per litre, in US $1. Why?
There is indeed a problem for our market, its known as monopolistic behavior. Because we are such a small market vendors and wholesalers can and do monopolise access to our markets, to NZers detriment.
Petrol is a commodity bought I suspect off the same south asian refiners so difference can be down to tax, did you even bother to check that? Also there is indeed a population differential, 20million v 4 million. ie petrol may indeed be one of the few competitive commodities coming down to how much is bought.
Taxes and exchange rate make most of the difference. We do have a massive excise on petrol if you hadn't noticed. (Also geographical not geological they are two entirely different animals!!)
I'm not sure about your comment with iPhones, if you can buy for $US200 then buy one online!
By the time you add the exchange rate, GST etc, if will be about the same. Most products work out having reasonably similar prices, it could be that you are referring to a price based on a runout sale versus normally retail.
The iPhone 6s is listed in the US from 649, in NZ from 1199. Almost exactly the same price with the current exchange rate and GST.
Sometimes differences are due to different products, for instance with new BMWs the models sold new in NZ are much higher spec than the UK or Japanese models, hence our price is quite a bit higher.
On a new Porsche we ordered recently the price was actually almost the same as the UK price on like for like options.
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