Paul Spoonley: Growing population has upsides as well as problems

Population growth contributes to the country's productivity, available skills and demand. But not everyone or everywhere benefits. Photo / Nick Reed

It was interesting to see Bill English acknowledge in his Budget speech the pressure that current population growth is putting on infrastructure. And a Herald editorial was right to associate this with economic growth. The International Labour Organisation estimates a 1 per cent increase in population expands GDP by between 1.25 and 1.50 per cent.

Population growth contributes to the country's productivity, available skills (especially when immigration policies are based on skills recruitment) and demand. But not everyone or everywhere benefits.

New Zealand's population grew last year by 1.9 per cent, which is relatively high. Australia's, by comparison, grew by 1.4 per cent. It is a combination of natural increase plus net migration gains. Those net migration gains were minimal following the global financial crisis. Readers might remember the 53,800 New Zealanders who left to live and work on the other side of the Tasman in 2012.

But that has changed dramatically since New Zealand emerged from the crisis. Immigrant arrivals and net gains have been at an historic high since 2014.

Last year, natural increase added 28,700 to New Zealand's population while net migration added another 58,300. The latter figure is anticipated to increase to more than 70,000 this year.

The three most important groups in these net gains come from returning New Zealanders, those arriving as skilled immigrants, and international students. But the benefits these arrivals bring are not evenly spread.

Auckland is the most obvious beneficiary as it attracts more than half of all these immigrants and these arrivals now contribute to two-thirds of Auckland's population growth. And from now through to the 2040s, Auckland will be responsible for 60 per cent of New Zealand's population growth.

Auckland gains from the effects of agglomeration. Population growth and immigration is associated with economic growth and diversity. For example, Auckland and Canterbury between them accounted for almost all the new jobs growth in New Zealand last year.

Immigration is key to this as skilled immigrants add to the human talent pool that is available to employers. They also establish new businesses and contribute to demand, including for education. Regions and cities that are not attracting immigrants are losing out on this current windfall.

The challenge for any government is to spread the benefits of net immigration around the country. Australia and Canada do this better than New Zealand, in part because they have states that have their own immigration policies and actively seek to attract and retain immigrants.

But there are downsides. While immigrants, by and large, contribute positively to Auckland's economic vitality, they also add to the demand for housing and the pressures on transport infrastructure. More than 40,000 cars have been added to Auckland's roads since last year.

And do immigrants displace local workers? The historic data says no, but New Zealand is experiencing very high arrival levels and there might be a case for looking closely at what this means for some sectors and occupations.

One of the international debates is whether we fully understand the impact of immigration for local authorities. My sense is that the Auckland Council is doing much more to anticipate and respond to current immigration rates but is it enough?

The Treasury anticipates net immigration will fall back to previous levels of around 12,000 per year. For the moment, New Zealand dominates the OECD in arrivals as a proportion of the the population, annually gaining 1.6 per cent compared with 1 per cent or lower for both Australia and Canada.

Is there enough in our policy settings and responsiveness to fully capture this population growth, in accommodating the growth in Auckland as well as spreading the benefits around the regions, many of which are facing a future that will see little or no growth, or a population decline?

Distinguished Professor Paul Spoonley, Massey University, is a lead investigator on the research programme: Capturing the Diversity Dividend of Aotearoa New Zealand.