15 Mar 2024

Independent infrastructure body will help sustain record immigration - economist

9:15 am on 15 March 2024
AUCKLAND, NZ - MAY 29:Traffic on Queen street  on May 29 2013.It's a major commercial thoroughfare in the Auckland CBD, New Zealand's main population center.

Photo: 123rf.com

New Zealand should not be afraid of borrowing and spending more money because the government books are one of the tidiest the world, a senior economist says.

Kiwibank chief economist Jarrod Kerr told Morning Report high net migration was great, but infrastructure was not keeping up.

He could not say if booming migration might impact the Reserve Bank's calculations on inflation.

"It looks like the benefit to the labour supply is outweighing the demand side impact."

He said it was great that there were more workers, who were young and filling vacant roles, and that was "putting downward pressure on wages".

"But we have seen rents rise, rents are up about 4.5 percent."

That was a result of a shortage of dwellings, he said.

"There's a push-pull effect happening on inflation."

New Zealand had an average migration gain of 50,000 a year between 2013 and 2020.

Kerr said a lot more needed to be done to support the inflows of migrants.

"We thought 40 [thousand] was a big number, here we are at 130 [thousand].

"We're not keeping up. We're not maintaining the infrastructure that we have, and we're certainly not building infrastructure that we need for the popular growth that we've got."

Borrow more, give up debt limits

Kiwibank chief executive Jarrod Kerr

Kiwibank chief economist Jarrod Kerr. Photo: Supplied / Gino Demeer

The government should give up its 30 percent debt limits, Kerr said.

"These debt limits, this fear of taking on money to do what we need is not needed, it's unnecessary, it's unhelpful.

"We have a government balance sheet which is very tidy, very strong - one of the strongest in the world."

He said New Zealand was among 10 countries worldwide that had a AAA rating, and the UK and US were not part of it.

"We have the ability to double our debt according to Standard and Poor's without getting a downgrade, so we can leverage up, we can get money at reasonable rates."

It was wrong to blame the finances, instead, execution was the problem, he said.

An independent infrastructure body could be a start, he said, with funding that had a long-term objective - "one that's not mucked around by election cycles".

There also shouldn't be concerns about whether immigration would decline, Kerr said.

"All it took was opening the borders and people came back in droves. If anything, New Zealand's brand has improved over Covid.

"People want to come here. And you got to think about where they're coming from - Asia, China, the Philippines, India. This is a massive upgrade."

Record level migration

Migrant arrivals and departures have hit record levels in the past year, but the monthly gain is slowing, latest figures show.

Stats NZ said there was a net gain of 5300 migrants in January - the lowest since October 2022.

The annual gain was nearly 134,000 compared to December's annual gain of 139,000.

Australia was the main destination for New Zealanders leaving, which included significant numbers of Chinese, Indian and British citizens.

The government has signalled aspects of its immigration policy are set for a reset and are actively under review.

Yesterday, Infometrics principal economist Brad Olsen said the monthly drop in migrant numbers was more likely to be a plateau as opposed to the beginning of a sharp drop.

Those arriving were being added to the workforce "but at the same time, those people also require services at a time when the economy is still stretched and inflation is still high".

Olsen said the increased numbers were also adding to pressure on existing rental housing stock - particularly in Auckland.

On the other hand, ASB senior economist Mark Smith earlier said permanent and long-term immigration was expected to cool over the next few years as the slowing economy "reduces the attractiveness of New Zealand as a place to live and work".

He said it was also likely that some newly arrived immigrants would leave in a year or two.

Get the RNZ app

for ad-free news and current affairs