Opinion: Our ageing population and immigration settings are bad for all of us

Our population is growing at its slowest rate in 36 years and there are now less than four working-age New Zealanders for every superannuitant. Photo / Greg Bowker

Opinion

OPINION: Population growth, demographic changes and immigration policy are all important factors that followers of investment markets play close attention to. These are drivers that have a profound impact on a country's future.

Here in New Zealand, they help shape the society we live in, the quality and types of goods and services we produce and consume, the levels of tax we pay and ultimately the performance of our businesses.

Since the beginning of the Covid outbreak, and the closing of our borders, New Zealand companies have been impacted by the availability of human resource - and in this regard we are still looking for an unfiltered bright light at the end of the tunnel.

Therefore the release of our most recent population data by Stats NZ last week made for sobering reading.

According to these figures, New Zealand's population is growing at its slowest rate in 36 years and there are now less than four working age New Zealanders for every super annuitant. Purely from an economic perspective, this creates a compelling argument to adjust our current immigration settings.

Through lockdowns, we as business analysts observed how difficulties in attracting and retaining offshore talent manifested in higher wage bills, increased vacancies and lost productivity for the companies we invest in.

We are part of a global economy, and therefore the lack of internationally-sourced talent affects many of our industries.

Our technology sector has established itself as being up there with the best in the world. To remain world-leading and support our overall economic health, we need to be able to attract the best in the world.

Ensuring we have immigration settings that are attractive to the international pool of talent is critical to help New Zealand stand out from the crowd.

The retirement and aged care sectors are experiencing similar issues with recruiting and retaining people. The most telling statistic here is the number of registered nurse vacancies currently on job-seeking platform Seek: some 1,600 vacancies nationally at the time of writing.

Due to their own funding constraints, these sectors have found it difficult to compete with District Health Boards (now Health NZ) for registered nurses. Traditionally this has seen migrant workers strongly represented within the aged care sector.

While demand from the sector grows as our population ages, the enduring combination of closed borders and funding gaps means operators are finding it very difficult to attract and retain good people.

Unlike the technology sector, where some of this pressure has been released with open borders, the health sectors are still asking for the immigration settings and funding gaps to be appropriately addressed.

Just as the technology sector is competing for its engineers and developers, our health sectors are competing globally for nurses. Across the ditch, our Aussie neighbours are rolling out the red carpet and welcoming international talent with open arms. Meanwhile, all we seem to be rolling out are more hurdles to clear.

One of the most confronting aspects of the Stats NZ data release for us as investment analysts was the rate at which our population is ageing.

We have known for some time that our population demographics are changing, but the recent uptick in super annuitants versus working age people is alarming – and not just from a healthcare perspective.

There's also the issue of how we fund our old.

According to The Treasury, our national superannuation bill for 2021 was NZ$16.6 billion. To put this in perspective, this would currently require every employed Kiwi between the ages of 18 and 65 to donate $100 from their weekly wage to cover this. And this burden will only grow as our population continues to age.

Social issues including ram raids and pressure on policing show we need immigration policies fit for purpose and a considered approach to population growth, Tim O'Loan says. Photo / Hayden Woodward

Beyond the obvious long-term economic consequences, population change and the current immigration settings are creating significant societal inequities right now that can't be ignored.

Vacancies in education, from early childhood right through to secondary schools, are applying pressure on families and schools.

Access to local early childhood education is not only now a fundamental step in a child's educational pathway, it provides critical support to families – particularly during tough economic times.

Parents need to work to pay the bills and put food on the table and rely on early childhood education to do so.

Further along the education ladder, primary school class sizes are increasing. As is often true in many areas of life, the squeaky wheel gets the good oil. Therefore those pupils that require additional attention, whether because they excel or are struggling, will likely receive that attention, but this will be at the expense of the kids in the middle.

Clearly we need more teachers, and we need to retain the ones we have. The same goes for our police. The videos of central city ram raids carried out in broad daylight make for confronting viewing, yet a lack of police resources does little to discourage this from happening over and over again.

While each issue requires unique and targeted solutions, the common denominator is that our immigration policies need to be fit for purpose and a considered approach to population growth needs to form a part of the future solutions.

We expect our politicians to listen, so as we head into an election year we can all play a part in elevating the importance of getting these issues right for the sustainable social and economic health of the whole country.

-Tim O'Loan is a research analyst, New Zealand equities, at Nikko Asset Management.