NZ Economy- Population
Again, an article by Gareth morgan on population growth. Real estate is driven by supply (houses available and interest rates) and demand (population). It seems clear which way the balance is swinging now...
People Matter - Migration - 6 October 2005
Wasn’t long ago the New Zealand economy was trucking along on the back of high population growth, arising from big net immigration numbers. What’s happened? Growth is holding – just – but we’re running on empty.
Population growth has slumped back to a sub-1% annual rate well down from the 1.7% pa growth earlier this decade and below our long term average rate of 1.2% pa. Indeed the net migration Labour has overseen exceeded in significance that National fostered in the mid-1990’s. It was the largest contribution to population growth from migration we have experienced since the 1950’s.
And the economy responded merrily. Together with falling interest rates it has been population growth over the last few years that have underpinned the giddy appreciation in house prices. It appears however that both pillars of that wealth boom have been knocked over.
During 2002, when population growth peaked at around 1.7% pa, immigration got to 2.5% of the population and emigration was no worse that 1.4% of the population. So 1.1% of the 1.7% growth in population came from net migration. Those new folk of course required accommodation and feeding and some at least contributed to production as well. A population growth-driven economic expansion was established.
Where are we now? Net long-term migration has slumped to be just 0.2% of the population. It’s been flattened. What’s more when we look at whether there’s more people leaving or fewer people arriving than during those heady days of 2002, we find it’s both. Arrivals are down from 2.5% of the population to 1.9%, and departures have jumped from 1.4% to 1.8%.
Those are the numbers, let’s now look at reasons why.
Firstly, the immigration side is a bit easier to decipher as it is controlled by our immigration policy and the approval criteria we apply. We can assume the supply of migrants to New Zealand is for all intents and purposes, infinite. That of course takes no account of the quality of those that wash up. So the government imposes qualifying criteria and those have been anything but steady over recent years.
From the time that National first opened the valves in the mid-1990’s the quality and quantity of migrants has been controversial. Indeed arguably it’s been the raison d'être for Winston Peters’ tenure in politics. In an attempt to raise the quality the government has played with the English language requirements and more recently imposed the requirement of having a job to go to.
These changes choked the numbers coming in although we’ve seen a big growth in temporary visitors, including students and temporary workers. And from the ranks of these have come some “permanent” converts. These days they have an advantage over applicants for migration located overseas in that they already have a job or can more readily find one when they apply to stay. Foreign students may have turned off New Zealand for several reasons including the poor performance of our English Language schools, but temporary workers have remained a vibrant source.
This conversion of temporary visitors ameliorates the fall in numbers of so-called “permanent” arrivals. Nevertheless the overall intake of permanents is down.
The departures side of the equation is far more open to economic influences, there being no institutional barriers to exit. Historically when economic times abroad look better than at home, they go. This is what makes the recent rise in outflow somewhat puzzling. The home economy has been pretty vibrant and yet the numbers leaving have been rising since mid-2003. Sure there have been the factors such as student loans that encourage the outflow but that anomaly has been in place for quite a few years now. Other drivers of the outflow have included despondent recent migrants finding our country not to their taste, businesspeople discouraged by the increasing progressivity of the personal income tax regime here, and that old favourite – a perception that Australia is not only sunnier, but offers a higher standard of living.
As the graph illustrates we’re used to a net outflow of folks to Australia. During our mid-1980’s boom few found reason to leave, then our post-1987 doldrums enticed them to leave in droves. With the 2000 global crash the outflow was stemmed again but of late the increased numbers leaving does defy the conventional wisdom that it’s relative economic performance that’s the major driver of the flow. The loss of population certainly is Australia’s gain as we are short of labour now, and being that way threatens the tenure of our economic recovery.
So where does this lead us? We know that migration policy can work away effectively on the inflow of people, it can’t always get the quality we might require but certainly getting the requisite head count about right isn’t that tricky. Yet we do look to be a bit short on arrivals right now and this is not helping giving that it’s coinciding with a jump in departures. The combined effect has been to almost halve our rate of population growth.
Unless this slump in population growth is reversed then we can expect the growth of this economy to slump with it. Unless of course we discover some elixir to achieve productivity-driven growth. Maybe our current population slump may be just the tonic to force our businesses to adopt production techniques that at last lift overall productivity growth in New Zealand from its torpor up to where it has to be if we are to achieve a lift in living standards in the face an ageing population. That’s a big ask.
People Matter - Migration - 6 October 2005
Wasn’t long ago the New Zealand economy was trucking along on the back of high population growth, arising from big net immigration numbers. What’s happened? Growth is holding – just – but we’re running on empty.
Population growth has slumped back to a sub-1% annual rate well down from the 1.7% pa growth earlier this decade and below our long term average rate of 1.2% pa. Indeed the net migration Labour has overseen exceeded in significance that National fostered in the mid-1990’s. It was the largest contribution to population growth from migration we have experienced since the 1950’s.
And the economy responded merrily. Together with falling interest rates it has been population growth over the last few years that have underpinned the giddy appreciation in house prices. It appears however that both pillars of that wealth boom have been knocked over.
During 2002, when population growth peaked at around 1.7% pa, immigration got to 2.5% of the population and emigration was no worse that 1.4% of the population. So 1.1% of the 1.7% growth in population came from net migration. Those new folk of course required accommodation and feeding and some at least contributed to production as well. A population growth-driven economic expansion was established.
Where are we now? Net long-term migration has slumped to be just 0.2% of the population. It’s been flattened. What’s more when we look at whether there’s more people leaving or fewer people arriving than during those heady days of 2002, we find it’s both. Arrivals are down from 2.5% of the population to 1.9%, and departures have jumped from 1.4% to 1.8%.
Those are the numbers, let’s now look at reasons why.
Firstly, the immigration side is a bit easier to decipher as it is controlled by our immigration policy and the approval criteria we apply. We can assume the supply of migrants to New Zealand is for all intents and purposes, infinite. That of course takes no account of the quality of those that wash up. So the government imposes qualifying criteria and those have been anything but steady over recent years.
From the time that National first opened the valves in the mid-1990’s the quality and quantity of migrants has been controversial. Indeed arguably it’s been the raison d'être for Winston Peters’ tenure in politics. In an attempt to raise the quality the government has played with the English language requirements and more recently imposed the requirement of having a job to go to.
These changes choked the numbers coming in although we’ve seen a big growth in temporary visitors, including students and temporary workers. And from the ranks of these have come some “permanent” converts. These days they have an advantage over applicants for migration located overseas in that they already have a job or can more readily find one when they apply to stay. Foreign students may have turned off New Zealand for several reasons including the poor performance of our English Language schools, but temporary workers have remained a vibrant source.
This conversion of temporary visitors ameliorates the fall in numbers of so-called “permanent” arrivals. Nevertheless the overall intake of permanents is down.
The departures side of the equation is far more open to economic influences, there being no institutional barriers to exit. Historically when economic times abroad look better than at home, they go. This is what makes the recent rise in outflow somewhat puzzling. The home economy has been pretty vibrant and yet the numbers leaving have been rising since mid-2003. Sure there have been the factors such as student loans that encourage the outflow but that anomaly has been in place for quite a few years now. Other drivers of the outflow have included despondent recent migrants finding our country not to their taste, businesspeople discouraged by the increasing progressivity of the personal income tax regime here, and that old favourite – a perception that Australia is not only sunnier, but offers a higher standard of living.
As the graph illustrates we’re used to a net outflow of folks to Australia. During our mid-1980’s boom few found reason to leave, then our post-1987 doldrums enticed them to leave in droves. With the 2000 global crash the outflow was stemmed again but of late the increased numbers leaving does defy the conventional wisdom that it’s relative economic performance that’s the major driver of the flow. The loss of population certainly is Australia’s gain as we are short of labour now, and being that way threatens the tenure of our economic recovery.
So where does this lead us? We know that migration policy can work away effectively on the inflow of people, it can’t always get the quality we might require but certainly getting the requisite head count about right isn’t that tricky. Yet we do look to be a bit short on arrivals right now and this is not helping giving that it’s coinciding with a jump in departures. The combined effect has been to almost halve our rate of population growth.
Unless this slump in population growth is reversed then we can expect the growth of this economy to slump with it. Unless of course we discover some elixir to achieve productivity-driven growth. Maybe our current population slump may be just the tonic to force our businesses to adopt production techniques that at last lift overall productivity growth in New Zealand from its torpor up to where it has to be if we are to achieve a lift in living standards in the face an ageing population. That’s a big ask.
posted by Prognosian | 9:40 am
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