If they come, we must build it.
OPINION
New Zealand’s immigration records are tumbling ... again!
We had a record net migration gain of 96,200 in the July 2023 year, according to Stats NZ data last week.
The 208,400 migrant arrivals in the year to July 31 was also the highest annual number on record.
The net migration rate has hit a new annual high every month this year and probably will continue to for several months yet.
Is this a historic demographic trend threatening to reshape our society and economy, or just a temporary symptom of post-pandemic weirdness?
It’s probably a bit of both.
Almost every social and economic statistic we get is still under the influence of the Covid-19 years.
It is startlingly easy to forget just how big and unusual the pandemic was.
The huge surge in arrivals this year has to be related to the fact our borders were closed for two years.
So, too, does the large exodus of New Zealand citizens.
Almost 40,000 Kiwis left New Zealand in the past year. As much as some commentators would love us to believe they are all fleeing woke tyranny and economic collapse, it hardly seems surprising that twice as many young people than usual are heading off on their big OE this year.
Pent-up demand has been unleashed in both directions across our borders.
But there is also a bigger trend at play.
If we step back and look at the net migration figures for the past 30 years or so we can see average net migration has been on the rise.
Migration flows have always been a cyclical thing, but the peaks have been getting progressively higher and longer, the slumps have been getting shorter and shallower.
Last week, global investment bank UBS crunched some numbers as part of a look at the New Zealand economy.
The country’s population has lifted by about 50 per cent since 1991 to 5.2 million, it noted.
UBS expects it will reach 8.3 million by 2073, based on Stats NZ’s “high migration” scenario of ~50,000 net per year.
Stats NZ models low-, mid- and high-migration scenarios. Based on its track record of forecasting, and what now seems to be bipartisan political support for running high migration, it seems reasonable to expect population growth at the upper end of the range.
Labour (in coalition with NZ First) briefly claimed it was going to run low-immigration policies, but it never really did.
I watch immigration data closely because it has a huge bearing on the short-term economic outlook.
But I pay more attention to it than some other economic indicators because it is so interesting in its social influence.
The biggest reason that I’m generally in favour of steady net migration gains is because I think new people and different cultures add vibrancy and energy to this country, which is still young and relatively underpopulated.
One long-term economic benefit of immigration is that it pushes back against an ageing population.
Immigrants tend to be young working-age people. And we are going to need younger working-age people to pay the taxes to fund our superannuation needs because we are not breeding enough of them.
There are obviously short-term economic benefits too, but they are not one-sided.
People are the economy. They spend money and create wealth, so more of them boosts GDP.
But they also need somewhere to live, they drive on the roads and require medical services.
So more people means more pressure on crucial infrastructure.
That’s fine as long as our governments aren’t lazy about booking the economic gains without investing for the population growth.
Unfortunately, guess what, they are! New Zealand governments have been very slack on this front.
The last National government was one of the worst.
There were mitigating reasons for that, just like there are mitigating reasons for the performance of the current government post-Covid.
Times were tough after the GFC and the Christchurch earthquakes.
We leaned on immigration (and let it stimulate the property market) to drive momentum in the economy.
National was focused on balancing the books during that period and only decided - too late in my view - to put its foot down on infrastructure investment in its third term.
Then we had a change of government and a revamp of all the infrastructure plans ... and then the pandemic hit.
So here we are, still miles behind on infrastructure investment but up to our neck in debt again.
To be fair, there has been progress on housing. Labour’s tenure has seen historically unprecedented levels of residential construction.
But it seems to me the mismatch is between having a bipartisan consensus on high migration yet almost no consensus on infrastructure planning.
Collectively, we are all too ready to book the gains from high net migration but not the costs.
That’s just bad business practice.
Given the talk of fiscal constraint now dominating the election campaign, it looks like we’re about to repeat the same mistakes again.
There is an alternative to debt funding infrastructure, though, and I hope both major parties will lean into it.
We can partner with private capital.
That doesn’t just mean letting big foreign funds come in to build toll roads (although I think we should consider that on a case-by-case basis) - it could also mean unlocking more local capital from KiwiSaver and the NZ Super fund.
The point is that there isn’t necessarily a shortage of available capital with regard to infrastructure investment, even if there is a shortage of government capacity to borrow more.
Meanwhile, we need to ensure that our migration policy is set correctly to deliver people with the skills we need.
But we also need to remember that migrants are people, not abstract economic units.
If we allow them to settle in New Zealand then we need to afford them the same rights and benefits as everyone else.
Expectations tempered around return to surplus in 2027/28.