Finance Minister Nicola Willis says the Crown accounts underscore the need to restore discipline to public spending. Video / Mark Mitchell
Opinion by Liam Dann
Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.
Perhaps, as former Prime Minister Sir Robert Muldoon once quipped,Kiwis leaving for Australia are raising the average IQ of both nations.
But it seems unlikely. Sadly, those leaving are probably smart, well-qualified, employable young people who just don’t see opportunity in New Zealand right now.
What the stats do tell us is that 81,200 Kiwis left these shores long-term in the year to August. In nominal terms, that’s probably the highest number of annual departures ever.
It probably felt worse in the late 1970s and early 1980s because we didn’t have migrant arrivals to balance the population loss. Also that era – 1975-82 – was the longest sustained period of large-scale departures.
Migrant arrivals are falling fast. And the number of recent migrants who are departing again is also rising.
As Westpac senior economist Michael Gordon put it after Friday’s data: “We’re forecasting annual net migration to slow to zero for the 2025 calendar year (which implies that the monthly figures will turn net negative for some of that period), reflecting the soft economy and fewer job opportunities in New Zealand.”
This marked slowdown in population growth would affect the outlook for the economy’s growth rates, the balance of labour market pressures and the expected tax take, he said.
It also seems likely to provide a headwind to the housing market and retail sector. We have an economy that has become accustomed to running on astonishing levels of population growth across the past two years.
Young people are heading offshore in record numbers. Photo /123rf
More than 130,000 new residents settled in New Zealand in the year to October 2023. They all needed housing and cars, food, furniture and entertainment.
But it’s the departure of Kiwi citizens that really hurts.
Some economists make a strong case that running much lower net migration would be better for New Zealand in the long term. It would force us to do more of the hard work that is needed to boost productivity.
We’d have to focus more on education and skills to produce the specialist workers we need. We’d have to invest more in technology and machinery to make our businesses more efficient.
I agree that turning the immigration tap on and off has been all too easy for governments in the past couple of decades. It has flattered GDP and masked some big underlying issues.
The sudden collapse in numbers is not going to feel great. But the high departure rate of Kiwis is something more serious and the Government needs to make addressing it a top priority.
Departing Kiwis represent more than just the loss of consumers and workers. They represent a deeper, more worrying, lack of faith in the economic outlook.
To put it in the colloquial language Christopher Luxon was using in the election campaign last year, they represent New Zealand’s current lack of “mojo”.
Luxon accurately diagnosed one of the important intangible issues New Zealand was dealing with. Confidence, swagger, joie de vivre – call it what you like – the country doesn’t have much of it. To put it in the language of Gen Z: we’re just not slaying right now.
That’s not an easy thing to turn around.
Clearly, in the Government’s first year – the anniversary of the general election ticks over on Monday – the priority was dealing with inflation and addressing the Crown’s precarious fiscal position.
Whatever degree of credit you think Luxon and Nicola Willis deserve for it, the war on inflation has been won. It is a victory for their Government.
Economists are forecasting that next week’s Consumer Price Data will land safely back inside the Reserve Bank’s mandated target band of about 2.2% or 2.3% per annum.
After the Treasury release on Thursday, which showed the annual Crown accounts slipped $3.4 billion further into deficit for the year to June 30 ($1.8b worse than expected), there are still big fiscal challenges to be managed.
Fiscal constraints will remain important but it is a balancing act. Generating stronger economic growth and boosting the tax take is a vital part of the equation.
This Prime Minister has sounded good in the past couple of months, looking forward and talking up growth plans: streamlined regulation, fast-tracked infrastructure, free-trade deals and foreign direct investment.
Hopefully, we’ll see some economic impetus from this stuff across the next 12 months. But it is going to be hard going.
Lower interest rates will ease the financial load for businesses and homeowners, hopefully bringing a bit of momentum to the economy.
But for many of the younger Kiwis heading to Australia or further afield, low rates don’t directly change the outlook.
Unemployment is expected to keep rising for some time. Wage growth is likely to be stunted, coming back to earth along with the growth in consumer prices.
The underlying conditions that are driving the exodus of Kiwis will be with us for a while.
So in the meantime, the challenge is to convince the public that the future is brighter and that the Government has a bold and inclusive vision for this country.
It’s a leadership challenge. Listening to Luxon speak, it’s a challenge he clearly understands and is passionate about.
His success or failure (appropriately for a former CEO who makes much of targets and metrics) may well be measured in the migration data across the next two years.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
