Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Saturday, 27 February 2016

Students push NZ immigration to the max

Immigration recession!

No actual recessions have transpired in Australia through the financial crisis or beyond.

In fact we haven't had a recession for a quarter of century now.

The media just loves to use the "R" word, though, so the next best thing is to create a bit of new terminology to satisfy the lust: recessionary capital expenditure, balance sheet recessions, income recessions, a "global freight recession" (whatever that means - haven't even worked out how this one is defined yet). 

The latest contender could be an Australian Kiwi immigration recession!

The most timely figures released by Statistics New Zealand showed a net gain of +6,100 migrants into New Zealand in the month of the January 2016, with a few Kiwi residents leaking back across the Tasman to the land of the long white cloud.

This takes net immigration into NZ up to +65,900 in the year to January 2016 which is the highest figure on record.

I wouldn't buy the narrative that this has been driven by an amazing NZ economy which has outshone ours in Australia, though.

In fact there is anaemic wages growth in the NZ economy and a dairy industry downturn which racked up a staggering $4.9 billion of cuts to income through 2014/15, with an incredible 85 per cent of NZ dairy farmers operating at a loss.

In truth, a few parts of the NZ economy are evidently active: for example, there has been an Auckland housing boom and a raft of associated construction.

Meanwhile the third largest city in NZ is also in the process of being rebuilt after a devastating earthquake in 2011, the seismic activity leading in turn to economic activity.

However, the surge in New Zealand migration has largely been fuelled by a relaxation of student visa rules, resulting in a huge surge in migration from India of +15,200 in the year to January, around three quarters of whom travelled on student visas.

We can expect to see similar trends unfolding in Australia over the next few years, with a huge ramp up in Asian international students already underway.

It seems likely that migration into NZ has partly been primed by increased mobility, with the relatively high cost of living in some Australian capital cities encouraging more Kiwi residents to return home.

Aussie departure lounge

The total number of permanent and long term migrants from Australia increased further in January, although the annual rate of growth in total Australia migration to NZ has slowed steadily over the most recent four months from +9.9 per cent in September 2015 to +8.6 per cent in January 2016.

After accounting for movements in the other direction the result was a net annual migration from Australia to New Zealand of +1,300, which was the fourth month in a row to record a net annual migration of more than +1,000.

Although net annual migration of +1,300 from Australia doesn't sound like much, this represents a marked shift from a few years ago with the Aussie mining boom in full swing when up to a net 40,000 Kiwis per annum departed for Australian shores on a long term or permanent basis.

Tide to turn

It's difficult to predict the timing of the peak, but this trend probably won't last.

Although New Zealand's wild labour market data showed a headline rate of unemployment declining to 5.3 per cent in the December 2015 quarter (see here) the participation rate is falling, declining by fully 1 per cent over the year and sinking for three quarters consecutively.

Meanwhile annual wages growth in NZ has fallen to its weakest level in nearly six years at just +1.5 per cent. 

The equivalent figure is +2.2 per cent in Australia

Locally in NZ, ASB senior economist Jane Turner noted that:

"This trend has been slowing with the Australian labour market improving while NZ's is slowing. Furthermore, recent policy announcements may, at the margin, convince some New Zealanders residing in Australia to stay put in order to gain citizenship". 

That's pretty much it.

Cuts both ways

Increased mobility has other impacts too, with the number of short term visitors heading to Australia from New Zealand soaring to record highs.

On this side of the ledger, total visitors from New Zealand to overseas locations zoomed to a record high 2.42 million in January 2016, with visitors to Australia up by +47,400 to 1.14 million.

The was the highest ever number of trip by New Zealand residents to Australia in a single year, up by +4 per cent from the January 2015 year. 

Overall, population growth into Australia has switched significantly over recent years from New Zealanders and Brits towards immigrants of Asian origin. 

As such Australia's Department of Immigration and Border Protection (DIBP) forecasts net overseas migration into Australia to increase for the remainder of the decade, from +177,200 in 2015 to +237,900 in the year to June 2019.

As in New Zealand, international students form a key  part of projected Australian population growth.

In fact, there are many similarities between the economies located either side of the Tasman: weak commodity prices, a residential property boom focussed in the main cities, a boom in international students from Asia, a generally soft labour market, weak wages growth, and Reserve Banks looking down the barrel of further rate cuts.

A few Kiwis leaking home won't make much difference to Australia's economy on the whole, with most settlers now hailing from Asia.

In any case, the trend looks set to roll over in 2016.