"We expect the annual net migration inflow to reach around 25,000 over the next year. That population gain will add additional pressure to supply-constrained housing markets in Auckland and Christchurch, the two most popular destinations for migrants.
"That is part of the reason that we expect only a gradual slowing in house price inflation."
Westpac economist Felix Delbruck said statistical modelling suggested a net inflow of an extra 10,000 was associated with an extra 3 percentage points of house price inflation.
Net migration had turned from a significant drag on the housing market - in the middle of last year there was an annual net outflow of 4000 - to a positive factor which would only get stronger.
"If recent trends continue, annual net immigration will easily surpass 20,000 by the end of this year. And with unemployment in Australia expected to hit around 6.5 per cent next year, we expect net immigration to rise even further in 2014, which would make this New Zealand's biggest migration cycle since the early 2000s," Delbruck said.
In the year ended September 43,300 people left permanently for Australia, 90 per cent of them New Zealand citizens, which was 10,300 fewer than the year before. That was offset by 18,100 arrivals from Australia, 65 per cent of them returning New Zealanders. Australia's unemployment rate of 5.6 per cent compares with 6.4 per cent in New Zealand.
But according to recent OECD data the two countries are level-pegging in terms of the employment rate, that is the proportion of 15 to 64-year olds employed. In June this year it was 72.2 per cent in Australia and 72.8 per cent here.
New Zealand's higher unemployment rate reflects a higher labour force participation rate, which is the proportion of the working age population either employed or actively seeking work.
An upsurge in net migration boosts both the demand and supply sides of the economy.
ASB economists in their quarterly economic forecasts released yesterday said firms were slowly starting to report more difficulty finding workers and that pressure is expected to grow.
In Canterbury, where employment rose by 5.6 per cent over the year to June, those constraints are already pronounced, so extra workers would ease some of the pressure, they said.
Meanwhile, in Australia investment in the mining sector, a key driver of employment growth in recent years, is expected to peak this year and the number of people employed in the sector has already fallen, by about 1 per cent or 2800, over the past year.
However, Deutsche Bank chief economist Darren Gibbs pointed out that although the net gain of permanent and long-term migrants (which reflects intentions declared in airport departure and arrival cards) was 15,200 in the year to September, the total change in population through both short- and long-term migration was just 5180 people.
"We think that this probably reflects self-proclaimed short-term departures by New Zealand residents that subsequently prove to be long-term departures, probably to Australia," Gibbs said.
"We suspect that the reduction in measured long-term outflows to Australia will begin to reverse in 2014 once clearer evidence of a stronger Australian labour market begins to emerge.
"Positive income differentials between Australia and New Zealand remain a powerful pull factor."
