When they stop coming
Immigration has been a huge driver of NZ’s economic success for the past decade but the pandemic has forced us to pull in the welcome mat,
Typically migrants are more entrepreneurial . . . It would be a bad policy choice to give up on that I think.
NZ Initiative executive director Oliver Hartwich
Net migration is set to fall sharply over the year ahead . . . We think that it could go as low as 5000. Westpac senior economist Satish Ranchhod
For better or for worse, a high rate of immigration has been the magic ingredient in New Zealand’s strong economic growth in the past decade. Now Covid-19 border closures have stopped that in its tracks, leaving a gaping hole in the economic landscape,
New Zealand’s net migration rate was 11.4 immigrants for every 1000 people already in the country in the year ended June
2019 — more than triple recent rates in the United States and United Kingdom.
That’s an average annual inflow of between 50,000 and 60,000 people for the past five years, which helped the population surge past 5 million this month.
While top-line GDP growth has tracked above 3 per cent for much of this period, once you account for that population growth it has been lacklustre — averaging just half that on a per capita basis.
For all the debate about pressure on housing and infrastructure, no one — not even strong immigration opponents such as Winston Peters — has ever suggested going completely cold turkey.
But that’s what has just happened. “Net migration is set to fall sharply over the year ahead,” says Westpac senior economist Satish Ranchhod. “We think that it could go as low as 5000.” That is probably going to be a temporary slowdown related to the closure of borders, he says.
“But even as those restrictions are lifted, we don’t think migration will go back up as high as recent years.”
A lot of immigration is to do with jobs, and New Zealand will see a big increase in unemployment in the coming year — perhaps to rates of about 9.5 per cent.
“Against that backdrop, we don’t think as many people are going to be looking to come in as there have in recent years,” says Ranchhod.
Relative to past recessions, net migration at 5000 might not be so bad, if it wasn’t such a rapid shift.
Traditionally, New Zealand has seen periods with a net outflow of migrants — Kiwis heading for greener pastures, mostly in Australia, during economic downturns.
This time, though, some key things are different.
Australia, like us, has the pandemic under control. And with a less export- and tourist-focused economy, it will likely recover faster.
But making it less appealing are tough anti-immigrant measures that in recent years have seen Kiwi residents losing social rights, including unemployment benefits and access to pandemic support packages.
And the trend for Kiwis to come home remains, as the rest of the world faces an uglier looking pandemic and recovery.
New Zealand also remains a more desirable destination in the eyes of the world.
Our Prime Minister is being celebrated around the world. In America and Europe, this country is often seen as some kind of liberal paradise.
Put simply, our profile is much higher than it was in previous decades, so it is likely that demand to come here will remain stronger.
That leaves the supply side of the equation in our hands.
Unlike the tourism industry, which faces a long wait for safe solutions to border control, those focused on longer term visitors see quarantine measures as providing a quick path back to normal.
“It’s likely that net migration will pick up more rapidly than tourism,” says Ranchhod. “People are coming in on migrant visas. They are planning to stay here for quite some time.” A lockdown period of two or three weeks is much less of a constraint than it is for somebody coming in on a tourist visa, he says.
“But I’m not so sure that the Government is really going to look to loosen up migration settings in a hurry.
“The Government is focused on the employment of the local population. We’re looking at a lot of challenges on that front.”
But the past week has seen Auckland mayor Phil Goff pitching plans to get students back. We’ve heard that the Government has already allowed some carefully managed entries for specialist health workers and even film industry people working on key productions such as James Cameron’s Avatar films.
So, what should the new normal look like for immigration policy in New Zealand’s post-Covid economy?
Unsurprisingly, business groups are keen to see the Government move faster to get the policy reset and back on track. There are two key arguments.
One is the aspirational view that smart immigration policy can help us rebuild a stronger and more productive economy — filling gaps left by the loss of tourist dollars.
The other more pressing issue is that skill shortages still exist and need to be addressed despite higher levels of unemployment.
“That’s part of the work the Government needs to do, and quickly,” says David Cooper, director of client services at Malcolm Pacific Immigration.
“We’re hearing from employers that want to get specific skilled workers in — and these people are not available in the local market, we know that. They’re asking ‘how do I get this guy here’ and the answer is that he’s not a doctor, so he’s not going to get a border exemption.”
There needs to be a signal to employers, on where the Government is prepared to draw a line in the sand, he says.
“Most employers only choose a migrant if they can’t find a Kiwi. Is the Government going to say that for lower skilled workers — where they have been given visas in the past — that they’re no longer prepared to do that?
“Policy will need to be adjusted and reprioritised,” he says.
But so far the Government response has not moved out of the emergency phase.
In mid-May it passed legislation which gave it strong powers to apply a flexible approach to immigration policy and visas over the next 12 months.
The Immigration (COVID-19 Response) Amendment Bill 2020 allows the Government
eight radical new powers to:
● Impose, vary or cancel conditions for classes of temporary entry-class visa holders
● Vary or cancel conditions for classes of resident-class visa holders
● Extend the expiry dates of visas for classes of people
● Grant visas to individuals or classes of people in the absence of an application
● Waive any regulatory requirements for certain classes of application (that is, waive any prescribed requirements that people need to fulfil to have their application accepted by Immigration NZ for assessment)
● Waive the requirement to obtain a transit visa
● Suspend the ability to make applications for visas or submit expressions of interest in applying for visas by classes of people who are offshore
● And to revoke the entry permission of people who are deemed to have been granted entry permission
Those powers should make a pragmatic response to the immediate immigration needs of employers much easier to deliver.
But so far there has been very little action on this front, which is frustrating both for many migrants left in limbo and for many businesses, says Cooper.
In a statement, Immigration Minister Iain Lees-Galloway has acknowledged the issues facing migrants who were caught by the border closures mid-process.
“The issue of migrant workers stuck outside the country is very much on our minds,” he said. “I am currently awaiting advice on using the new powers established under the Immigration Act and will then make decisions on potential visa changes that may assist them.” So while some clarity for those caught in the transition may be imminent, decisions about a wider policy seem some time away.
“Yes, we’ve had the immigration law changes but it’s the policy that the Government wraps around those that will determine the outcome,” says Cooper.
“We polled employers during the lockdown. Without exception they’ve said: we need those skills and we’re happy to fund the 14-day quarantine.”
But so far, despite attempts to both offer advice and receive some, Cooper says he’s had no response from Government.
That’s a worry, says Oliver Hartwich, executive director of economic think tank The NZ Initiative.
He also believes there is some urgency required on immigration policy.
“The choices we make now, even in the next few months, will have an impact on where we go in the next few years.”
The NZ Initiative sees strong net migration as a driver of economic growth that the country should lean on in the rebuild.
Hartwich does accept that rapid population growth has flattered New Zealand’s economic growth figures.
“On the one hand it is true that we haven’t had the GDP per capita growth we’d have liked to have. And high migration figures do mask that,” he says.
“But we shouldn’t conclude from that, the high migration figure has led to the low GDP figure.
“These are two separate issues. We could have had both. It is a question of getting the right kind of migrants into the country . . . especially qualified young migrants.”
To a degree, we were already doing that, he says. An NZ Initiative study in 2017 found that the country was well served by its migrant community, which typically paid more tax than people born here, had higher standards of education and better work outcomes.
“Typically migrants are more entrepreneurial,” Hartwich says. “It would be a bad policy choice to give up on that, I think.”
Which leads to the recent suggestions, from the likes of tech entrepreneur Rod Drury, that we should leverage our global profile as a safe haven and invite a wave of mega-rich migrants to our shores.
Drury has argued for loosening foreign investment rules to let billionaires purchase land in areas such as the Hawke’s Bay, Queenstown and Northland, in order to stimulate economies hurt by tourism’s decline.
The Prime Minister has been decidedly lukewarm on that suggestion.
But Cooper argues there is no need to reinvent the wheel.
We just need to fix the existing entrepreneur visa category so it actually brings the desired results, he says.
“We have an entrepreneur policy that is an absolute basket case,” he says.
“It’s not working, and hasn’t been working. I told the Minister over two years ago.”
Cooper says applications for the visa category have peaked at a 90 per cent decline rate. “I’ve been in the industry 35 years and I’ve never seen a visa category with such a high decline rate,” he says.
“That visa should be about bringing smart people in who have the money, the talent and the energy to run businesses. It can actually help save jobs and create new ones.”
The country also already has a pretty good investor visa category, he says.
“The PM has said no, we’re not going to take the mega-rich here . . . but the reality is there is a policy for the mega-rich,” Cooper says. “It’s working. Everyone thinks Peter Thiel and so on are just buying lifestyle blocks and not making a contribution . . . that’s not true.”
The combination of the direct investment requirements of the visa conditions and indirect spend have added billions to our economy, he says.
“I’d say it’s been worth $15 billion since the policy was introduced [in 2009].”
New Zealand runs two categories of investment visa: one for those with $3m to invest and another more lenient one for those with $10m.
Drury was effectively suggesting a third tier for those with $50m to invest.
Cooper argues there are other ways to enhance the scheme.
“At the moment it’s the taxpayer funding all these projects; what if we asked the wealthy to put their money into infrastructure bonds,” he says. “The Government then gets free money for five or 10 years.”
Ranchhod, though, expects this Government will be very cautious, particularly in an election year.
“There may be ways to structure migration policy to encourage the flow of capital into New Zealand to really kickstart the business sector but we’d need to be quite careful about that,” he says.
“One of the focuses we’ve had from a policy perspective is about ensuring local ownership of important resources and we don’t want to give that up while we’re boosting the economy.” There is a need for discussion about the skills balance we need in the economy, he says.
“But we need to kick-start the economy first to be in a better position to address immigration policy.
“If the economy is growing, it will put us on a much more stable footing for addressing other challenges . . . and there’s likely to be quite a few in coming years as we address the lasting scars of this downturn.”
For his part, Cooper says he is not pushing for mass immigration.
He just wants some certainty and some faster action to get the policy fit for purpose in the new economic landscape.
“Controlled and smart immigration has proven time and time again to help build this nation over the last 50 years in good times and bad. Let’s get on with it now and not get caught up in long policy processes — because we need the wins today to help our economy get back up and running.”
Per capita, immigration into NZ lately has been three times as high as in the US or the UK.