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Monthly Economic Indicators

Special Topic 1: Recent trends in external migration

Net migration turns positive...

Permanent and long-term (PLT) migration has recently garnered more attention from economists and media, with the rapid turnaround to a net positive inflow over the first half of 2013. Annual net migration has turned from an outflow of 4,100 in August 2012 to an inflow of 7,900 in June 2013. If the recent pace of net inflow is maintained, the annual inflow of migrants could reach 20,000 by the start of 2014. This is well above Treasury’s Budget 2013 forecasts, which assumed annual net migration would peak at 13,000 in mid-2014. The key driver for this turnaround has been a fall in departures to Australia, although total arrivals have been increasing as well. This will have important macro-economic and regional effects, particularly for Auckland and Canterbury. 

Figure 1 – Annual PLT migration
Figure 1 – Annual PLT migration   .
Source:  Statistics New Zealand both departures fall and arrivals increase...

The turnaround in net migration has reflected both a recent pickup in arrivals, as well as a fall in departures. Arrivals have typically been much more stable than departures over history, in part owing to regulation (ie, visas etc), but nevertheless have ticked up recently (Figure 1). Departures from New Zealand have surged since the recession, peaking at 88,000 during 2012, but have declined recently.

...with migration to and from Australia the main driving factor

The main driving factor behind the cycles of net migration is departures to Australia, which generally account for more than half of total departures (Figure 2). The surge in migrants departing for Australia reflects the strong performance of the Australian economy since the GFC, as well as high wages, particularly in the mining sector. However, with the mining boom at or near its peak and the recent softening in the Australian economy, it has become less attractive. This is likely one of the main reasons behind the drop in departures over the past six months.

Figure 2 – Annual migration to and from Australia
Figure 2 – Annual migration to  and from Australia   .
Source:  Statistics New Zealand

The small pickup in total PLT arrivals of about 4,300 over the past year has also been mostly driven by migration from Australia, with the annual inflow from Australia up about 2,500 in the year to June compared to the previous year. The increase in arrivals from Australia has included both New Zealand and non-New Zealand citizens. Total arrivals have accelerated particularly over the past six months, with the rest of the increase in migrants coming mainly from European and Asian countries.

Immigrants moving mostly to Auckland and Canterbury

New migrants moving to New Zealand typically move to main centres, with Auckland region the most popular, with around 35,000 having arrived annually over the past few years (Figure 3). Departures from the region rose since 2009 to peak at 31,000 at the end of 2012, but have fallen slightly recently. The cycles in Auckland net migration have typically been driven by changes in departures rather than arrivals, although the cycles have become much more modest since the early 2000s. Annual net migration to the region sits at around 5,000 at present, in line with historical averages. It should be noted that this does not take into account any internal migration within New Zealand.

Figure 3 – Annual external migration - Auckland
Figure 3 – Annual external  migration - Auckland   .
Source:  Statistics New Zealand

Given the earthquake rebuild, Canterbury is the other region that is of particular importance at present. The earthquakes have had a clear impact on net migration in the region, with arrivals falling and departures rising substantially following the earthquakes (Figure 4). Once again this does not include migration within New Zealand.

Figure 4 – Annual external migration - Canterbury
Figure 4 – Annual external  migration - Canterbury   .
Source:  Statistics New Zealand

More recently, there has been a marked turnaround in net migration, driven both by a fall in departures and an increase in arrivals, returning annual migration figures closer to historical averages. However, with many workers being recruited from overseas to help with the rebuild, we expect net migration inflows to the Canterbury region to increase further. This will further strengthen aggregate demand in the region.

Young people more mobile

Young people are typically more mobile when it comes to travelling both within a country and overseas for work. They generally have fewer commitments, allowing them to move more easily. Young people also often leave to go on their “OE”.

All of this is borne out in the data, with the numbers of younger people migrating much higher than for older people. The cycles are also much larger as well. Of interest here, however, is the recent turnaround in migration for some of these younger age groups (Figure 5).

Figure 5 – Annual net PLT migration by selected age group
Figure 6 – Annual net PLT  migration by selected age group   .
Source:  Statistics New Zealand

While net flows for several age groups have turned more positive very quickly, 20-24 year olds have seen the sharpest change. This has come through both a fall in departures and an increase in arrivals. In keeping with overall trends, a significant proportion of the increase is arrivals from Australia, with a high proportion of these arrivals NZ citizens (ie, returning Kiwis).

A similar pattern is evident for the 25-29 and 30-34 age groups, although their net flows have been positive for a while. The recent acceleration has also been caused by both a fall in departures and an increase in arrivals, including from Australia.

Recent trends expected to continue

Overall, there is little to suggest that recent trends in net migration will reverse soon. The New Zealand economy – despite the drought – is expected to expand solidly in coming years. The Canterbury rebuild will remain a key driver and attract more overseas workers to the region.

It is difficult to say when and at what level this cycle of net migration will peak, but at the current pace, the annual net inflow of migrants could reach 20,000 by the start of 2014. Stronger population growth implies stronger domestic demand and aggregate incomes, but also increases demand for government services

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