Pete Wargent blogspot

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

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Monday, 1 February 2016

Choice, bro?

Return to sender

One of the interesting trends to watch is permanent and long term migration, which tends to ebb and flow cyclically.

When Australia's mining boom was in full swing, for example, total annual population growth peaked at an extremely strong level of +407,000, driven predominantly by a spike in net immigration. 

Particularly in a commodities-focussed economy where trends can be so cyclical, eventually there comes a point where the economy cannot create the jobs to support such a high level of immigration, and as unemployment creeps up immigration naturally slows again.

As a result today Australia's population growth is tracking at a somewhat more sedate +317,000 per annum.

The "rock star" economy!

New Zealand's economy has been on an exciting run which saw its unemployment rate decline from 7.2 per cent in Q3 2012 to just 5.6 per cent within two heady years.

Indeed while New Zealand was busy recording the fastest economic growth of any developed nation in 2014, HSBC's Paul Bloxham fanously labelling it "the rock star economy" in January of that year. 

From early 2013 forth, New Zealand saw its net permanent and long term migration go on a stellar run from effectively zero to a peak of more than 6,000 per month.

As you can see in the chart below, permanent and long term migrants from Australia increased from 19,549 in 2013, to 23,275 in 2014, and then to some 25,273 in calendar year 2015.

It is important to note that mostly these were not Australians upping sticks for a new life overseas - rather two thirds of them were New Zealand citizens returning home, hopefully in order to take advantage of superior employment opportunities.

While New Zealand's unemployment rate had declined to just 5.6 per cent in Q3 2014, in Australia the unemployment rate ran as high as 6.4 per cent in January 2015, so in that context it is perhaps little wonder that so many Kiwis chose to return to the land of the long white cloud. 

Indeed, my previous analysis of demographic statistics on this blog has shown that Brits pretty much stopped coming to settle in Australia too, for similar reasons: London employment growth has been booming.

Critical mass

Of course, it wasn't only migrants from Australian shores that sought to enjoy New Zealand's rock star economy.

There was also rapid and significant growth in permanent and long term migration from India, China, Hong Kong, the Philipines, the United States, Germany, France, Canada, South Africa, Korea, and elsewhere.

All good booms come to an end

Of course, such trends cannot last forever - and alas! - in October Bloxo announced that the rock star New Zealand economy was a rock star no more!

Furthermore, it seems that the NZ labour market could not sustainably absorb such rapid immigration, and over the year to September 2015 the unemployment rate has reportedly jumped back up to 6 per cent (and rising).

Consequently, for New Zealand's immigration boom, that will most likely be the end of that.

The December data released today showed monthly permanent and long term migration fell from a seasonally adjusted 6,190 in November to 5,510 in December for a monthy drop of 11 per cent, although truthfully it is still too early to say whether this is definitely the beginning of the downtrend.

Meanwhile, Australia's economy surprised by adding a massive +342,600 jobs in the year to November 2015, in the process seeing its unemployment rate fall from its peak of 6.4 per cent to a most recent reading of 5.8 per cent, which is now lower than that of New Zealand.

This dynamic will likely now strangle the Kiwi exodus, although with increased mobility both countries have enjoyed a huge increase in tourism, including short term from our respective neighbours and particularly China.

Despite the above having been said, there is still plenty of slack in Australia's labour force, so there is hardly likely to be a rush of Kiwi permanent migrants rushing back here either in a hurry.