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Anti-migration populism hurts not helps the economy

Budget day last last week was dominated by the usual focus on the return to surplus, some new spending pledges and discussions of potential future tax cuts.

Soon afterward, however, commentators and politicians discovered the Treasury papers contained some political dynamite outside the core of fiscal policy: a projected rise in net migration figures.

After a net migration intake of only 2000 people in the 2013 calendar year, the budget’s forecasts for 2014 and 2015 are net migration gains of 31,000 and 35,000 respectively before returning to more moderate levels. By 2016, net migration is forecast to fall to 17,000 and decline further to just 12,000 a year in 2017 and 2018.

Once the opposition noticed these figures, Labour leader David Cunliffe promised to do something about them. In order to save the housing market from overheating, and to reduce pressure on public services, his party would slash migration to somewhere between 5000 and 15,000 a year, he said on TV3’s The Nation.

For a country with such a long history as a migration destination, it is astonishing just how quickly new migration can be portrayed as negative or even a threat. As the Treasury papers show, it is neither. 

On the contrary, the projected uplift in migration figures comes just at the right time for the New Zealand economy and provides ample economic opportunities. There are two caveats, however: New Zealand needs to attract the migrants it needs and it needs to lift its game to accommodate these migrants.

To put the Treasury’s forecasts into perspective, it is worth looking at long-term population trends. The Treasury predicts the population will increase by a quarter of a million people, from 4.46 million in 2013 to 4.72 million in 2018. That is an increase of just over a quarter million, which may sound substantial but it is important to realise two things about these numbers. 

First, more than half of the increase (57%) is natural (that is, more births than deaths) and only 43% is due to net migration. Second, by New Zealand’s historical standards, a population growth of 1.1% a year is not high. In 85 out of the 128 years where data has been collected, population growth rate was above this level.

The population growth forecast should be welcomed rather than feared. It comes at a time for the New Zealand economy when, figuratively speaking, we need all hands on deck. 

Yes, the population number will rise (as will the labour force) but the total number of people in employment rises even faster. This means the unemployment rate is forecast to go down to just 4.4% by 2018, even despite a slight increase in the labour market participation rate from 67.9% last year to 69.0%. 

To put it simply, there is no shortage of jobs for new migrants. They are entering a labour market, which is edging toward full employment, with labour shortages reported in parts of the country and across many industries. 

Without migration, pressure on wages and therefore inflationary pressures would increase. There can be no doubt new migrants will make a positive contribution to the development of the domestic economy. They will add to its productive capacity and also strengthen demand.

It certainly would not be in New Zealand’s interest to curb migration. Our ability to fine-tune migration figures is limited since a large part of the net migration intake consists of returning Kiwis. For example, people who once left for Australia and now return home as the Australian economy no longer looks that promising. 

These people have a right to reside in New Zealand and cannot simply be turned back at the airport.

Of course, Mr Cunliffe has a point when he says migrants add to housing demand and thus contribute to rising house prices. He draws the wrong conclusion from this truism, however. 

New Zealand has a housing shortage already. It is a housing crisis that desperately needs tackling – with or without new migrants. We only have ourselves to blame for this housing shortage, not new migrants. 

The number of new houses built dropped from a record 34,400 in 1974 to a little over 15,000 today. This number is woefully low. On such a poor level of house building, we will not be able to replace derelict housing stock, accommodate the trend toward smaller households in an ageing society and deal with a growing population – keeping in mind that 57% of this growth is natural.

 To be absolutely clear: New Zealand has a housing supply crisis, not a demand problem.

If New Zealand politicians were serious about the housing affordability crisis, they would focus their energies on unlocking the planning system, finding better ways of delivering infrastructure and making sure the houses get built that the country needs. 

But that would mean admitting political failures of the past; scapegoating migrants for high house prices is much more convenient. It is disingenuous regardless.

Politicians should face it: New Zealand is a migration destination – and it is all the better for it. Because we are such an attractive destination for potential migrants, we can afford to select those we need most. 

We can strategically define the skills we need to build our economy. But we should also ensure those who come here also subscribe to New Zealand values – that they speak our language, respect our laws and become part of the community.

I say all this as a migrant myself – and as a father of a Kiwi son who cares about this country and wants to make it better. I was once part of New Zealand’s net migration statistic. 

Maybe I pushed up house prices at the margin when I arrived. But I am doing my best to make this country a better place. Even if it means defending the positive impacts of migration against populist responses in an election year.

Dr Oliver Hartwich is director of the New Zealand Initiative

Comments and questions
26

Most New Zealanders don't mind migration. What they're sick of is having a migration racket system instead of migration system. The current model appears to favour applicants from undeveloped countries rather than New Zealand's historic preference for applicants from western nations. The result in Auckland has been to ethnically cleanse entire suburbs of what were once salt of the earth Kiwis and remove Maori from communities. The rot goes right to the top where it seems any criminal can pay for a passport or residency or dinner out. In any other country such rackets and corruption would be dealt with by the criminal justice system or be seen as a threat to sovereignty. There are now more Chinese red army reservists in Auckland than the NZ Police and army combined. It is easy to agree with the perspective that Asian invasion is displacing Maori and forcing Maori to immigrate to Australia, in effect ethnically cleansing Maori from the community. The current ban on New Zealand's historic preference for migrants who add value to the economy must stop. Make a decision - do you want to be a part of China, or do you want to stay ANZACS?

What a load of racist tripe. Wake up to a changing world, which NZ is part of. As a 5th generation NZer, I welcome honest, intelligent and hard-working migrants of any race, and that describes most Chinese who come here.

Totally agree. This racist needs to unwrap the scarf around their neck and let us see him /her for the red neck they are. I can only assume they never have, or will, dine out at a Chinese, Japanese, Morrocan, Vietnamese, Indian, Malaysian, French restaurant?? Seriously, this type of diatribe is exactly what we're trying to get rid of and more akin to what we'd find in middle America. Immigration is more complex than a race based policy. As yet I haven't seen one party actually fully embrace immigration with a clear policy on leveraging the benefits and investing in the outcomes. Ask any employer and I think you'll find their opinion is that the gateways fail to support the need.

NZ is too soft with Superannuation entitlements for immigrants whose countries do not have reciprocal agreements. It is a joke that someone can come and live here for 10 years, e.g. family unity (and not have to had worked here at all or for long), reach entitlement age and become entitled to the full super and healthcare. That is receive the same entitlement as a local who has worked and contributed through taxes for what could be 40 to 50 years of their life.
Superannuation and health care with a growing elderly population is already becoming unaffordable for the country. This soft policy needs to change, either by a person having to had contributed by working here a high number of years, or their country needs to contribute to their health/super. No more freebies we can't afford it!

The ones buying up central Auckland are not here to work. They often leave the homes empty or park elderly relatives in them, who are an additional drain on our resources. Do not be fooled, Chinese throwing money at NZ Real Estate does nothing for our economy or our children's chances of owning homes. These people are simply parking money in a country that ensures them a massive capital gain when they choose to sell up. Nothing more..

Perhaps someone should remove the red flag from around your red neck... For Pete's sake mate! At what point way back when was NZ just the way you liked it?
NZ has had tinkering happening around immigration for decades, throttle on, throttle off. Ask any employer and I believe you'll find the gateways are well behind the need. It has nothing to do with ethnicity and everything to do with prerequisite need. Instead of saying we can't cope, and applying the Cunniliffe theory of treating the symptom (as misdiagnosed as it is!), it'd be a breath of fresh air if we said, 'we want diversity, we need growth, let's put in place a plan to leverage and support it by investing in our future', instead of stifling it for some red neck idiots who would do better to join their red neck cousins in mid America! PS: I'm assuming you never dine out at Chinese, Turkish, Italian, Malaysian, Indonesian, French, or Morrocan restaurants?? You must be really missing the likes of Cob and Co!

Personally anonymous, as a middle age middle class Kiwi, I love the Asians being here. They add to the diversity, get in way less trouble than others, and have aspects of their culture that we could certainly learn from - if it's deemed to be driving Maori or anyone else away from NZ, and I very much doubt it, I say a fond farewell to those individuals because we certainly don't need them. Happy to have the UK immigrants as well, plus it keeps the racists happy who pout on about Asians in blogs.

Nothing to do with racism David, but quite simply if you opened your eyes and attended auctions etc in Auckland you will witness the pillaging of Auckland real estate by those who come in and 'invest' using free or cheap money (they do not borrow from NZ banks), and the majority are Chinese. This is not a level playing field in any sense of the word and Keys and Co are pretending it isn't happening. Is that what you want for your children and other Kiwis? Nice try, but crying 'racism' to hide a problem doesn't actually work.

I am not against migration either but I agree with anonymous that it is favouring Asians and it is not smart to favour one group over a great blend of cultures.

I also have an issue with the actual overall benefit of migrants - the ongoing costs to the health and education system. The age of the migrants - the fact that they can also bring both sets of parents and other family members - the parents start their new lives in NZ as a burden on the health system and their kids get free education after having never paid taxes in this country

I don't see the he benefit in them buying a nice house in the Eastern Suburbs of Auckland or in affluent East Auckland with their $1.5M - once that money is spent they just contribute to the Chinese economy in NZ - eating imported Chinese food and at Chinese owned restaurants etc . They simply enhance the Chinese economy here in NZ.

They don't integrate like the English, South Africans and dare I say - even the Poms.

So maybe change the immigration quota to ensure a mix of cultures enter NZ and not one dominant culture.This would then ensure that there is a true benefit to the NZ economy.

You mean like the South Africans congregating in Browns Bay / Mairangi Bay? So it's OK for them, but not OK for other ethnicities to congregate where they find support? Give me strength! What a sad sad lot the ill informed have become.

The bottom line is we are all migrants, as in 100%, it is just that some of us have a rather inflated sense of our value relative to our fellows.
Lets face it the politicians who today bemoan immigration were very recently wailing about emigration to Australia.
Methinks they at least strain their credibility, maybe even their integrity.
Don Macdonald

So The Doctor, unless they look the same, and want to be the same, you don't want them here ?...amazing, the same could be said of Kiwi's living in Asia, we have to be like them, be their friends, change who we are ? But the big question about your boldest statement is, why does it favour asians, one of the minorities in terms of immigration compared to the likes of the Poms and Australians who come here ?

Lets just make it clear - I love Asians - they are great citizens - I just think they make up too high a proportion of migrants. I have no criticism of them congregating together but I do have a concern that they create there own internal economies rather than with most other western migrants who buy and live locally

Also lets make it clear no other country in the world would let such high concentrations of migrants as we are with Asians - the Asians certainly wouldn't allow us to migrate there in such numbers and also to buy property so easily - ie like by absent migrants who just acquire residency and live back in Asia while we educate their families and look after the health of their parents - while they pay tax in their home jurisdictions

You cant say that is not the case here in NZ at present

The housing crisis is due to supply problems. If Cunnliffe really wants to be constructive he would get Labour to support the RMA changes and persuade Brown, the other Labour councillors and socialist planners to get building underway.

We should be rightly suspicious of those denigrating "populism" - as above.

What populism is, is the will of the people - a basic, commo sense wariness of antidemocratic moves - such as prioritising Asian immigrants, including now largely Chinese fleeing from the anti-corruption drives in China.

We should stop pretending that they can't buy us out of our own country - they can, and they are.

Much smarter countries like Canada and Australia, are now restricting the flow of Communist Chinese immigrants - the largest exodus in Chinese history. And it's growing.

But National, now being regarded as the party with the smell of money in its nostrils, is determined to take no action at all. Why?

Immigration, swamping a majority culture, is now highly problematic worldwide. For example, the UK today faces a huge problem as its unrealistic open border policy has seen house prices rise by £10,000 in the months between April 6 and May this year - that is nationwide!

In London, prices have risen a staggering £80,000 this past month -check out the daily Telegraph.

UKIP is speaking for Britons ignored by the Tories - just as National, John Key, Nick Smith and the usual inner circle of Cabinet are determinedly posturing that it isn't happening here.

But we all know it is. What's so important to John Key that he doesn't want to know ?

It's been left to Winston Peters to speak for New Zealanders now seeing the possibility of home ownership slip between their fingers.

We need a NZ equivalent to the BNP in the UK. Could team up with NZ First.

Having watched Q & A and The Nation this morning, it seems accepted as a "truism" that immigrants will only want to go to the big cities. So it seems to me that our problems are exasperated (inflation, productive rural versus urban planning issues, lagging regional economic growth, returning New Zealanders increasing the lack of needed skills sets etc) and many new issues created (potential geographic and other isolation of cultural immigrant groups in suburban locations and housing types etc).

What worries me about the approach of neo-liberal think groups such as Dr Hartwich's "The New Zealand Initiative" and many current government policies is that nice generalities are used to disguise issues that may well impact on fundamental questions of how we see New Zealand and the lives we want here.

It's so comforting to know that immigration is keeping NZ wages low, so that our best are encouraged to move overseas to get paid their true value. I can't wait until our wages are equivalent to the lowest in the world so that we can really appreciate a diverse NZ. We then wont need a special time for the 40 hour famine as it will be every day life in NZ

Maybe I'm missing something on the basic economics but your article clearly states the obvious.

Let the boat people into NZ to replace the one million skilled graduates and professionals who desert NZ for greener pastures and better societies.

David Cameron is drawing up new immigration laws in response to rising anger over the number of EU migrants moving to Britain, The Telegraph can disclose. ... Measures under discussion include a law to discourage British-based companies from employing cheaper foreign workers, deporting unemployed Europeans after six months and a new “wealth test” to prevent vast numbers coming to Britain from the poorest EU countries. http://www.telegraph.co.uk/news/uknews/immigration/10854566/David-Cameron-draws-up-immigration-laws-to-foil-Ukip.html

Moscow was hosting an international property show while I was there, and I found myself in a workshop at which eager would-be sellers of UK property heard from experts steeped in the ways of wealthy Russian buyers. Kim Waddoup, who has lived in Moscow for more than 20 years and runs the property show, had a warning for his audience: "Nothing in Russia is quite as it seems." This is, he stressed, still a developing country, but one with a rapidly growing middle class that has a lot of disposable income which they are keen to invest abroad. Some Russians may actually want to live abroad – not least to escape those long, bitterly cold winters – but for many, said Waddoup, it is primarily a hedge against the periodic crises that afflict an economy overly dependent on oil and gas. Russians trust bricks and mortar in posh parts of London more than they trust the rouble. But why London, I asked Waddoup after his presentation. "When Russia was first opening up, suddenly everybody saw the market potential here, and patterns were created which people have followed,” he said.
http://www.theguardian.com/cities/2014/may/09/rich-russians-buying-london-property-real-estate .

STOP migration completely... let only those in the commonwealth of nations move freely around it.

Leave out all the racist thought an look at the facts. NZ has a growing population and an ageing one at that which migration is making worse.

What NZ needs is more nzers and not people that want to come here and create there own communities and not offer to NZ what it really needs.

NZ needs to tighten migration and those that we do allow in need to add true value and not just bring money and all their family. Further to this new migration should be to towns outside the main centres where the infrastructure can support growth unlike Auckland.

Its a race to the bottow.

This US backed Jonkey government are using NZ inc as an experiment, at the cost of inequality and out of control lending.

Do the sums, GDP round $210 billion, $70 billion is government with $140 billion private. Just the companies which are either owned by overseas interests or have their shareholding in them are taking out $15 billion a year in profits. Assuming NZ inc own 50% of the $140 billion, which I suspect they dont, the return these overseas interest are getting from there investment is huge.

No country can fund this rort, unless you borrow the equivalent. A $60 billion increase in government lending being that.

If you believe this ivory tower talk then take a look at the UK. They are starting to realise unfettered migration places too much strain on the indigenous population, services and social cohesion. Recent election results point to the local populace starting to revolt as happened in Canada.

Immigration in its basic form is a way to import cheap labour keeping costs down and profits high. Before people argue NZ only brings in professionals explore where those professionals end up working. Too many are in taxis and lower paying jobs because their qualifications are not recognised by the business community or health sector.

NZ can either head off a growing problem or let it play out as other countries have done.

The problem is to many immigrants to quickly - not so much who they are or where they are from. It is destroying our way of life.

Many Kiwis do NOT want to live in a New Zealand that has changed its character (as Britain has) with excessive numbers of immigrants who do not share our way of life, who often only have English as a badly spoken second or third language.

As a 5th generation Kiwi I enjoy the diversity we now have - but not the sheer weight of numbers. (Asian drivers aside.....)

Economists have a very poor view if their only answer to a prosperous economy is immigration.
Immigrants are not "cheap labour" - naturally once here they want (and deserve) the same pay as everyone else.

I reckon NZ should be reciprocal in its immigration policy so if the immigrants country of origin allows pension transferability/Health/Housing etc NZ should reciprocate and not as applicable.