NZ 'needs more than high-skill migrants'

A focus on attracting highly skilled immigrants will not significantly benefit the New Zealand economy, which needs immigrants with varying skill levels to grow, Department of Labour research has found.

The study, Economic Impacts of Immigration, issued yesterday, says its modelling experiments "do not support arguments in favour of an entirely high-skill focused or targeted immigration inflow".

Under the skilled migrant policy, would-be migrants are given additional points if they have skills to work in industries facing shortages.

"Such targeting does not appear to significantly increase the overall benefits to increased immigration flows. When an economy grows, labour is required at all levels," the report said.

In a scenario where the composition of additional labour was specified in favour of particular higher-skilled categories through policy change or external impetus, the study found that it resulted in GDP being just 0.1 per cent higher than when no specifications were made.

It also found that the benefit to the export sector was 8.3 per cent above baseline, and not as large as the 8.5 per cent recorded where the inflow was "demand determined" rather than policy specified.

"This illustrates how the export sector requires semi-skilled, as well as skilled, labour resources in order to expand its activities."

The study, which also looked at the impact of additional influences that immigrants have on productivity and trade, found that increased immigration reduces production costs, improves the competitiveness of New Zealand goods and services benefiting exporters and benefits domestic investment and consumer spending.

More immigrants could be good for the Government's coffers, because it would result in higher Government revenues, improving its balance and outweighing the impact on spending.

"The results combine to improve both real gross domestic product [GDP] and real GDP per capita."

If the annual net inflow of 20,000 migrants was sustained, New Zealand would have a population of 4.5 million and annual GDP of $248 billion in 2021.

It would also yield an extra $28 billion in annual GDP over the period because the inflow of migrants at this level was estimated to be worth around $1.9 billion per year to GDP and $1000 per capita GDP in 2021.

Doubling the net inflow to 40,000 would add 6.1 per cent to the population to 4.8 million in 2021 and result in a 7.6 per cent rise in GDP.

But zero immigration could have a disastrous effect on the economy. "This scenario gives a New Zealand resident population of 4.1 million in 2021, 9.6 per cent below the 2021 baseline population ... the labour available is 10.9 per cent below the baseline figure."

Stopping immigration would also bring GDP in 2021 at 11.3 per cent below that of baseline, with GDP per capita at 1.8 per cent or $1000 below the baseline.

The report said if policies were to target particular skills, they should focus on skills with significant potential to improve overall productivity.

2021 FORECASTS
Immigration's impact on the economy.

At current level of 20,000 annual net inflow:
* Worth $1.9 billion per year to GDP and $1000 per capita GDP.
* NZ population will increase by 437,000 to 4.5 million and annual GDP to $248 billion.
* Will yield an extra $28 billion in annual GDP by 2021.

Doubling immigration level to 40,000 annual net inflow:
* Real GDP will be 7.6 per cent higher, and GDP per capita up 1.5 per cent.
* Export volumes will rise 8.5 per cent.
* Available labour will be increased by 7.4 per cent.

Zero immigration:
* NZ population will fall 9.6 per cent below baseline figure of 4.5 million.
* GDP will fall 11.3 per cent, and GDP per capita to drop 1.8 per cent or $1000.
* Available labour will fall 10.9 per cent.
* Export sector will be most affected, with export volumes dropping 12.9 per cent.

(Baseline level interpreted as scenario with no major policy changes)
Source - Department of Labour