The elephant in the room

Slowing migration may get PM off the hook

Migration pressure is easing — very slowly — but perhaps enough to suffocate the elephant in the room for the Prime Minister before she is forced to tackle it headon.

The annual net migration gain — the number of new people in the country when you subtract departures from arrivals — fell to 67,984 in the year to March.

That’s about 4500 below the record peak last July — not much, but just the enough for the Government right now.

Immigration policy has been an awkward thing for the Labour Party since it hitched a ride on NZ First’s anti-immigration wave last year under Andrew Little’s leadership.

Jacinda Ardern softened the rhetoric but broadly did not back away from Little’s suggested cuts of 20,000 — 30,000 to annual net migration.

Labour’s stance has even earned Ardern unfavourable and unfair comparisons to Donald Trump.

In reality though, Labour has not been quick to act on any new immigration policy other than to tighten up on rules for student visas.

That’s because it has become clear that going cold turkey on net migration gains would stall an already slowing economy. Ironically, it would slow the building of new housing and infrastructure needed to meet the growing population.

One suspects the lack of action is also because an anti-immigrant stance has never sat well with Ardern and the more progressive end of the Labour party — the team currently running things.

However, the coalition agreement with New Zealand First (which ran with anti-immigration rhetoric and suggested more radical cuts to a net gain of 10,000) has kept some pressure on. For the business community and many economists, the absence of further policy calls on immigration has been seen as the elephant in the room — the cause of great uncertainty.

A major decision in one direction or another could have a dramatic bearing on forecasts and business confidence.

But the gentle downward trend of the past nine months could provide a sweet spot for Labour.

Most economists expect the net migration number to keep falling slowly. ASB expects the net gain will be down to around 50,000 in 2019.

That’s within Labour’s pre-election target without requiring any fresh moves.

Economists with slightly gloomier outlooks — like Wellington-based Infometrics — see net migration falling as low a 17,000 by 2021.

According to Stats NZ, last month actually saw more migrant arrivals while the net figure fell because more people left.

Across the year and even on a three month averaged basis, permanent long-term arrivals are falling.

History suggests that migration trends can shift quickly — probably faster than even New Zealand First would like.

New Zealand in the past 50 years has had numerous periods of net migration losses — almost always coinciding with tough economic times.

That’s one of the reasons that National under John Key trumpeted gains as a success story.

It is worth noting, even if we see net migration falling by 30,000 this electoral cycle, we’ll still be dealing with historically unprecedented numbers of migrants.

The social pressures and changes that this decade of growth have created can’t be ignored.

But radical policy responses are risky because a sudden cut in migration could leave us with a stalled economy and no less pressure on current infrastructure and housing.