Thomas Coughlan: Migration - the next political faultline?

Migration policy will come to the fore as border restrictions are relaxed. Photo / 123RF

OPINION:

It's unsurprising the Government has decided to move on from the Covid-19 pandemic - voters appear to be moving on too.

The most recent Taxpayers' Union-Curia poll looked at "major issues" for the electorate, and saw Covid-19 fall from 32 per cent in October to 21.7 per cent in February, before plummeting to 7.5 per cent in March.

The economy is now the biggest single issue among voters, polling 15.9 per cent, while the cost of living was at 7.5 per cent, and housing and the environment are on 6.9 per cent and 6.6 per cent respectively.

Jacinda Ardern has previously said the point at which people decide to "move on" from Covid is not necessarily the point at which the pandemic moves on from us. Indeed, Curia itself knows this - their poll was interrupted after staffers came down with the virus.

One political issue that looks set to make a comeback after being largely dormant for two years is migration. The political focus during the pandemic has been on the rights (or lack thereof) of separated families and essential workers. Before the year is out, this story will broaden into broader debate about normalising migration settings once the border opens.

The politics of migration are unique in this country. While many developed economies like Australia, the UK, and the United States have struggled to grapple with immigration over the last two or three decades, the problem in New Zealand has been quite different.

Immigration undoubtedly had an impact on the 2017 election, when voters elected three parties which campaigned on tightening migration (even the Greens had a policy to cut numbers, which they wanted limited to 1 per cent of the existing population each year - the policy was quickly dropped after an outcry from members),

But just nine years prior, the previous change of government followed an election fought in part over the issue of emigration, when John Key promised to stem the loss of young people to Australia.

Between 2004 and 2008, New Zealand recorded a net outflow of nearly 5,000 20-29 year olds each year. From 2013, the trend reversed, and by 2016 New Zealand recorded a net inflow of 20,000 people from that age group.

Both emigration and immigration concerns are making a comeback.

Analysis from Infometrics economist Brad Olsen published this week warns of a looming "brain drain". Net migration is currently negative, and Olsen reckons there are around 40,000 Kiwis who would usually have left the country in the last two years, but have not because of the pandemic. These people could be about to leave, as the global Covid picture normalises.

The Government's much-awaited migration reset will set out its plan for more controlled, highly-skilled migration.

However recently announcements from the Government appear to have cut against that promise. The Government is currently in a tight spot on labour issues - partly a victim of its own success.

Unemployment is low, but wages aren't rising as fast as they should. The Government wants to allay businesses' fears of staff shortages and rampant wage inflation by allowing working holiday visa holders into the country. In February, it announced a loosening of the requirements for getting a critical worker border exemption, to allow people with job offers paying 1.5 times the median wage to qualify - previously the threshold for an exemption had been an offer at double the median wage.

The Government isn't trying to use migration to keep a lid on wages in any structural sense - these are temporary measures - but it is using migration to allay some labour cost pressures on business, which are inflationary.

This will be a difficult issue for Labour to navigate. There is not a straightforward relationship between migration and stagnant wages (if there were, you'd expect wage growth to be stratospheric right now). Both Labour and National face the difficult task of promising growing incomes to catch up with rising costs, while not sparking a wage-price spiral while encouraging migration, but not for the purpose of depressing wages.

Labour has another issue here too.

The Government is forging ahead with its Fair Pay Agreements policy, which will give workers far more bargaining power when it comes to increasing their pay. The first agreements will probably land when the current wave of inflation has abated, but if messaged poorly, the agreements risk opening up the "price of a coffee debate" that John Key successfully used to argue against large minimum wage hikes when prime minister (Key's argument was increased wages led to increased costs).

National has its own migration problem.

The party's immigration spokeswoman Erica Stanford has successfully outflanked Labour on the issue of compassion (a rare achievement), and National, it would appear, will run on a policy of higher migration than Labour (leader Christopher Luxon has told the Herald he thinks net migration should be about 50,000 or 1 per cent of the total population - essentially the same number as the Greens in 2017).

Where this gets difficult is on the issue of infrastructure. National has said it would address New Zealand's infrastructure gap (currently about $104b, according to the Infrastructure Commission). One challenge that bested National during its last term in Government was that while it allowed cities like Auckland to grow into super-diverse metropolises, its preoccupation with debt reduction meant the party trimmed back on capital investment.

In 2018, ANZ released research showing Net core Crown Government capital spending for each 1000 additional people fell from $142 million in 2011/12 to just $37m in 2016/17.

On current forecasts, the Government has lifted that spending significantly to about $50m to $60m in new core capital spending per 1000 new residents forecast over the next five or so years. Luxon faces an uphill battle to balance his migration and population policy, with a more hawkish stance on government spending (if he's serious about wanting to reduce debt, quietly trimming the capital allowance is a good way to do it).

There currently exists a multi-party consensus around the overall benignity of migration in New Zealand. Long may that last. Both parties, as borders reopen, should take care that New Zealand's growing diverse population raises productivity and lifts incomes for all, while not putting pressure on services of which existing residents are rightly protective.