Net migration loss of 20,000 could hurt economic growth – Kiwibank

New Zealand is facing its biggest net migration since 2011 as Kiwis leave for better-paying international jobs, according to Kiwibank.

An annual net loss of up to 20,000 migrants was possible this year with the opening of borders,
Kiwibank economists estimated in new research.

Departing Kiwi numbers are expected to return to pre-Covid levels much faster than long-term migrant arrivals.

“The gradual timing of border reopenings is expected to reverse net migration figures over the next 12 to 18 months. Long-term departures are expected to increasingly exceed arrivals in 2022,” Kiwibank said.

“Annual net migration flows could reach 20,000 by the end of the year. This is similar to the last major migration period seen in 2011, when an Australian mining boom drew Kiwis across of the gap for the prospect of a six-figure salary.”

While immigration numbers are expected to pick up in 2023, the near-term impact is expected to dampen economic growth, Kiwibank chief economist Jarrod Kerr said.

“It’s a headwind, especially in the year we have.”

Kiwibank had a GDP growth forecast of just 3% for 2022, reflecting reduced consumption as the cost of living and interest rates rise, Kerr said.

Last week, ANZ lowered its 2022 GDP forecast to just 2.1%.

ANZ economists also predict a net loss in migration as borders open.

In addition to potentially slowing economic growth, the net loss of workers could exacerbate existing labor shortages, which could add to inflationary pressure, Kerr said.

“It’s concerning because we are already losing people to a tight labor market, which means the next 12 months are going to be even more troublesome,” he said.

“We think it’s a big deal.”

Labor shortages are currently a global phenomenon, which means there is no shortage of opportunities for skilled workers, Kerr said.

There was also likely to be pent-up demand for young Kiwis looking to leave on their OE.

Normally, Kiwis would look to Australia and the UK for these kinds of opportunities, but even the United States was struggling with an extremely tight labor market, he said.

Local employers are already seeing their growth hampered by staff shortages.

A December report from the New Zealand Institute of Economic Research (NZIER) showed that 73% of businesses said they had difficulty finding skilled workers, with 60% saying they had difficulty finding unskilled workers.

Fifty-one percent of manufacturers said a labor shortage was the factor that most limited their ability to increase revenue.

New Zealand citizens can now enter the country without having to self-isolate. From April 12, our Australian comrades can do the same, in addition to people on temporary work visas and student visas.

From May, visa-exempt countries will follow Australia. And by October, the border will be fully open to all visa categories.

This roadmap has certainly been welcomed by tourism operators and education providers, Kiwibank said.

The government roadmap has also been subject to change and the planned opening of the border to Australians has already been brought forward.

Either way, it will likely take some time for normal immigration levels to return, Kerr said.

Unlike departures, long-term arrivals would be hampered by the
reopening of the border, Kiwibank said.

Before Covid, the top three sources of non-New Zealand arrivals were China, India and South Africa. All three were non-visa exempt countries.

“In fact, applying the current visa waiver parameters to data on non-New Zealand migrant arrivals shows that most pre-Covid arrivals were from countries without waivers. The border will reopen to these countries from the quarter of December,” Kiwibank said.

Starting with the December quarter, Kiwibank sees long-term inflows begin to
increase significantly, and eventually drive net migration back to an average of around 30,000 people per year.

“That’s higher than the long-term average, but well below pre-Covid highs.”

A net migration gain back to these levels would boost the economy.

“But we think that’s a story for next year,” Kerr said.