More to gain from migrants


It’s not long ago that the opposition was complaining that too many people were leaving New Zealand.

Now the migration tide has turned in our favour, they’re complaining that too many are coming here.

In doing so they are resorting to dog-whistle anti-immigration sentiment and ignoring the fact that inwards migration helps the economy:

For a country with such a long history as a migration destination, it is astonishing just how quickly new migration can be portrayed as negative or even a threat. As the Treasury papers show, it is neither. 

On the contrary, the projected uplift in migration figures comes just at the right time for the New Zealand economy and provides ample economic opportunities. There are two caveats, however: New Zealand needs to attract the migrants it needs and it needs to lift its game to accommodate these migrants.

To put the Treasury’s forecasts into perspective, it is worth looking at long-term population trends. The Treasury predicts the population will increase by a quarter of a million people, from 4.46 million in 2013 to 4.72 million in 2018. That is an increase of just over a quarter million, which may sound substantial but it is important to realise two things about these numbers. 

First, more than half of the increase (57%) is natural (that is, more births than deaths) and only 43% is due to net migration. Second, by New Zealand’s historical standards, a population growth of 1.1% a year is not high. In 85 out of the 128 years where data has been collected, population growth rate was above this level.

A net migration gain doesn’t just mean more people arriving, it means fewer are leaving and among those coming are New Zealanders returning, most of whom we should be welcoming back.

The population growth forecast should be welcomed rather than feared. It comes at a time for the New Zealand economy when, figuratively speaking, we need all hands on deck. 

Yes, the population number will rise (as will the labour force) but the total number of people in employment rises even faster. This means the unemployment rate is forecast to go down to just 4.4% by 2018, even despite a slight increase in the labour market participation rate from 67.9% last year to 69.0%. 

To put it simply, there is no shortage of jobs for new migrants. They are entering a labour market, which is edging toward full employment, with labour shortages reported in parts of the country and across many industries. 

Without migration, pressure on wages and therefore inflationary pressures would increase. There can be no doubt new migrants will make a positive contribution to the development of the domestic economy. They will add to its productive capacity and also strengthen demand.

It certainly would not be in New Zealand’s interest to curb migration. Our ability to fine-tune migration figures is limited since a large part of the net migration intake consists of returning Kiwis. For example, people who once left for Australia and now return home as the Australian economy no longer looks that promising. 

These people have a right to reside in New Zealand and cannot simply be turned back at the airport. . .

On the contrary, they should be welcomed, at least some of those will be people whose leaving was lamented as contributing to the brain drain.

Politicians should face it: New Zealand is a migration destination – and it is all the better for it. Because we are such an attractive destination for potential migrants, we can afford to select those we need most. 

We can strategically define the skills we need to build our economy. But we should also ensure those who come here also subscribe to New Zealand values – that they speak our language, respect our laws and become part of the community.

I say all this as a migrant myself – and as a father of a Kiwi son who cares about this country and wants to make it better. I was once part of New Zealand’s net migration statistic. 

Maybe I pushed up house prices at the margin when I arrived. But I am doing my best to make this country a better place. Even if it means defending the positive impacts of migration against populist responses in an election year.

It’s not the quantity of immigrants that’s a concern, it’s the quality.

The author, Dr Oliver Hartwich, is right that we can afford to select immigrants we need most.

We can, and should, also ensure those who come here subscribe to our values, speak our language, respect our laws and become part of the community.

That will happen much more easily if we are welcoming and willing to help migrants adapt to their new home.

It will be made more difficult by the xenophobia which opposition MPs, to their shame, are encouraging.

Aaron Schiff (Hat tip Matt Nolan) points out we gain from immigrants:

. . . We should celebrate because on the incoming side, skilled immigrants provide New Zealand with a significant free gift. Some other country has paid the cost of their birth, childcare, childhood medical care, education, etc. They turn up in New Zealand effectively bringing all that investment with them and this benefits the country. Sounds good to me.

Sounds very good to me.

More praise for Bill


Scott Sumner at the Money Illusion on a recent trip to Australia:

. . .  I was particularly impressed with the talk given by the representative from the New Zealand government (Bill English) but will admit to knowing little about that place, other than that their people live in Hobbit-style dwellings. . .

About which, Matt Nolan opines:

. . . Whether you agree with the policies of the National party, or the specific things that Bill English has pushed through as Finance Minister, you have to admit that he has done an incredibly good job over the past five years – during an incredibly difficult time.

 This is not the first time I’ve heard people overseas sing Bill English’s praises (it is probably in double-digits now) – over here we have a Finance Minister who understands the issues, and tries to communicate them clearly.

Sure it makes it easier for me to say good things about Bill English since he doesn’t seem to be directly involved with any of National’s policies I’ve strongly disagreed with (this has been more the social welfare area) – but even if my prior beliefs were different, the fact that English has been transparent and straight up when discussing issues, and the fact he seems to strongly work to understand and work with broad expert advice about fiscal issues from around the world, tells me he has done an excellent job.

Often Finance Ministers are judged solely on the luck they faced given their time in change, so lets be honest here and admit that during a tough time Bill English and his team have done a good job.  I know this post will be particularly unpopular with a section of the readers here, but it has to be said!

I’m completely apolitical – but having a Finance Minister that doesn’t make the role about themselves, and who gives an honest appraisal of the trade-offs faced from the broad thrust of government fiscal policy, is exactly the sort of person you want. . .

It’s good to know it’s not just those of us with a blue bias who admire Bill and what he’s managed to do in very trying times.

The Auckland conundrum


If house prices are high in Auckland because more people want to live there.

And more people want to live there because that’s where the jobs are.

How do you explain the latest Household Labour Force Survey which shows higher unemployment there?

Matt Nolan says other factors are also involved in house prices.

And Lindsay Mitchell thinks that the unexpected rise in the number of job seekers could be not so much about people losing jobs but more about people becoming available for and seeking work.

If that’s the case it would show that expecting people on benefits who could work to do so is already having an impact.

However, the real measure of success will be when they find and keep the jobs.

If some of those jobs weren’t in Auckland then that might take some of the pressure of house prices too.

Wages beat inflation


Good employment news from Statistics New Zealand:

Salary and wage rates, which include overtime, increased 2.0 percent in the year to the December 2011 quarter, Statistics New Zealand said today. This rise follows a 2.0 percent increase in the year to the September 2011 quarter.

After the 2008/09 recession, annual wage rate growth in the labour cost index (LCI) dropped to a low of 1.5 percent in the year to the March 2010 quarter. Since then, the proportion of surveyed pay rates showing annual rises has grown – from 43 percent in the year to the March 2010 quarter to 56 percent in the year to the March 2011 quarter. This remained relatively stable during 2011 – including 57 percent in the year to the December 2011 quarter.

Salary and wage rates for the private sector increased 2.0 percent in the year to the December 2011 quarter. Annual growth remained steady throughout 2011. Public sector rates increased 1.8 percent in the year to the December 2011 quarter. This increase includes a 2.3 percent rise in the local government sector, the highest annual increase since a 2.5 percent rise in the year to the December 2009 quarter.

The Quarterly Employment Survey (QES), also released today, showed a rise in employment and total paid hours. For the December 2011 quarter, the seasonally adjusted number of full-time equivalent employees rose 0.6 percent, while seasonally adjusted filled jobs rose 0.5 percent. Seasonally adjusted total weekly paid hours rose 0.6 percent for the same period.

Average hourly earnings for ordinary time (ie excluding overtime) rose 2.8 percent for the December 2011 year, after rising 3.2 percent for the September 2011 year.

These aren’t big increases but given the uncertain global financial outlook it is encouraging.

Mat Nolan at the Visible Hand in Economics points out that the wage increase was higher than inflation and – who’s surprised? – people who made a fuss about wages growing more slowly than prices aren’t, or at least haven’t yet, celebrated  the positive reversal.

Stats Dept is squeaky clean UPDATED


Labour’s building and construction spokesperson Phil Twyford didn’t like the message so he attacked the messenger:

If any government department must be squeaky clean in terms of political neutrality at all times, it should be Statistics New Zealand, says Labour’s Building and Construction spokesperson Phil Twyford. . .

“There was a large slump in consents in September this year compared to September last year —- seasonally adjusted figures fell 17 per cent, including apartments, and fell 14 per cent when apartments are excluded — but the headline on the Statistics NZ press release read: Trends for new home approvals continue to rise.

Talk about spin!” Phil Twyford said. “Stats NZ’s enthusiasm could perhaps be excused in less partisan times, but during an election period when National is patting itself on the back for doing as good a job as anyone could in terms of keeping the economy ticking over, it is impossible not to see a lack of neutrality in the department’s media release. . .

Statistics New Zealand’s chief executive, Geoff Bascand, understandably took exception to this slur on the department’s neutrality:

As Government Statistician, I am fiercely protective of my statutory independence in the production and release of statistics.

Statistics New Zealand takes its responsibility seriously to explain and present statistics in a meaningful and accurate way.

Phil Twyford MP has questioned our choice to highlight the trend series of statistics in our 31 October release of Building Consents Issued: September 2011.

In this case, volatility over the past months meant that in our judgement, the trend series provided the most useful indicator of movements in building activity.

We also reported the seasonally adjusted series within the first paragraph of our media statement and our more detailed information release included the actual monthly number of building consents.

Statistics New Zealand has an obligation to release objective statistics. We will continue to do this at all times.

Phil needs to take a chill pill if a headline in a media release is sufficient to raise his ire.

If he was more interested in the truth than creating his own headlines he would have contacted Mr Bascand before making the serious accusation that the department was breaching public service neutrality.

The department is squeaky clean, its accuser is just squeaking.


He’s not just wrong on the neutrality, he’s wrong on the stats.

Matt at The Visible Hand In Economics and Alex Tarrant at both point out Twford has misunderstood the data.

Higher costs is the point – updated


Complaints that the ETS will impose higher costs on us seem to have missed the point – that’s what it’s supposed to do.

Imposing higher costs on activities which cause emissions is designed to provide an incentive to change behaviour which will lead to reduced emissions.

Matt Nolan at The Visible Hand in Economics puts it simply:

 Even if you don’t believe in global warming, we have a liability that is based on carbon emissions.  As a nation, either people who produce the carbon pay for it – or everyone pays for it through higher taxes.

So here in lies the question – do we want higher prices for carbon goods or lower incomes because of higher taxes?  Given that the liability is a function of the amount of carbon we produce, it follows that pricing carbon on the basis of this will lead to the “best” solution – no matter what political party you support.

If the cost of something rises, it doesn’t follow that consumers’ costs will increase by the same amount.

If the price of fuel and power go up, we have a choice about paying the increase or using less. Saving fuel and power will save money. 

Using less energy and using what we do use more efficiently makes economic and environmental sense whether or not you think the climate is changing.


Scrubone gets it and Kiwiblog’s post on Matt’s post has generated lots of comments.

Inflation is theft


Some things are too important for politicis – monetary policy is one of them.

But Phil Goff has turned his back on 20 years of concensus with his announcement that fighting inflation is no longer the most important priority.

“Our Reserve Bank policy targets are not well designed to produce a stable and competitive exchange rate, nor to keep interest rates as low as possible,” Mr Goff said in a speech to Federated Farmers in Wellington.

The battle against inflation was no longer the most important priority — growth and wealth creation were equally vital, Mr Goff said. . .

He might have remembered that you can’t have real growth and wealth creation with inflation if he’d read Eric Roy’s post on the National Party MP’s new blog:

In the mid eighties . . . I had just purchased an additional block next door.  The budgeted $40K surplus I calculated disappeared to a $90K deficit as interest rates soared to, in my case, 23.5% . . .

Those interest rates were driven in large part by soaring inflation.

Inflation is theft.

It erodes the real value of investment, adds to the cost of doing business and makes exports more expensive. Just look at Zimbawe.

Goff spent nine years in a government which undertook several reviews on monetary policy. He could have changed it then but did nothing, now he’s decided from opposition, where he can’t do anything, that he wants to something.

Not just one thing, but four: he wants a stable and competitive exchange rate; reduced interest rates for businesses and home owners; continued priorities of price stability and low inflation; and to guard against expectations of price rises.

Matt Nolan at the Visible Hand in economics explains the flaws in that wish-list:

So, with goal 1 they want to reduce the flexibility of NZ$ prices, which will lead to higher unemployment and a worse allocation of resources.  Furthermore, they want to keep the dollar low which implies subsidising exporters to the cost of households in the short-term.

With 2 they want to punish savers.

And with 3 and 4 they want to contradict themselves – as by limiting price flexibility and holding the exchange rate and interest rates down they WILL drive an increase in inflation expectations, dump price stability, and remove any chance of a low inflation environment.

 He has related posts here,  here and here.

Offestting Behaviour seconds that.

BK Drinkwater says reads Nolan’s posts and weep for the integrity of the Labour Party, who are leveraging public ignorance of economics to embark on a feckless campaign of populist short-termism.

Kiwiblog says if inflation gets out of control we all get poorer.

Not PC doesn’t want tinkering he wants abolition.

Federated Farmers president Don Nicolson says government spending is the root of the monetary policy problem.

Macdoctor counters some fiscal ignorance.

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