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The Government is trimming the number of migrants over the next year, saying it will help reduce pressure on inflation and house prices.
Immigration Minister David Cunliffe has reduced the target number of migrants for 2007-08 to between 45,000 and 50,000 - down from a band of 47,000 to 50,000 the year before.
He said actual migrant numbers last year were about 47,000, at the lower end of the band, and further tightening was needed to help reduce pressure on inflation.
The cut follows repeated warnings from Reserve Bank Governor Alan Bollard blaming immigration as one of the factors fuelling inflation, partly by pushing up house prices because of the extra demand.
Robin Clements, chief economist with UBS, said the step would be of limited success because it did not address the other end of the problem, the numbers of people leaving.
While migration was inflationary because the demand it placed on housing outweighed the reduced pressure on wages, he said restricting incoming numbers would not make much difference. "It's all very well to control one side of it by restricting the numbers arriving, but it's the outflow that is more important."
In the year to March, the number of migrants entering New Zealand was about 12,000 more than the number of people leaving.
Mr Cunliffe has previously described the likely effects on inflation as small but said shrinking the target was needed to help reduce pressure on inflation as interest rates soared.
"With the economy strong and New Zealand competing in a global market for skilled migrants, our top priority ... is ensuring we get high-quality migrants while not adding to inflationary pressures."
