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3.2  Setting of assumptions

This subsection runs through how the assumptions behind the population projections used here were set by Statistics New Zealand.

3.2.1  Fertility assumptions

Long-run fertility assumptions are set by considering short-run and long-run trends in age-specific and the aggregate total fertility rates (TFR), both cohort and period, in New Zealand and other countries.

Over the period to 2026, fertility rates are gradually reduced from the recent high values above 2.1 to their long-term levels. The TFR is the sum of all the single-year fertility rates. This is the average number of children a woman would have during her lifetime if she continued to experience the age-specific fertility rates of that year. Note that unlike many economic assumptions, the key demographic assumptions of fertility and mortality are not necessarily the averages of past settings. We are dealing here with structural changes from past patterns.

Once the aggregate fertility tracks are decided on, the breakdown into single year-of-age fertility rates is based on recent patterns. The long-term medium assumption is 1.9 children per woman. The low and high brackets around this are 1.7 and 2.1 births per woman in the long run.

Figure 3.4 - Total fertility rates
Figure 3.4 - Total fertility rates.
Source: Statistics New Zealand (1921-2060), 1920 and earlier years are Treasury estimates.

3.2.2  Mortality assumptions

For the 2008-base population projections, Statistics New Zealand sets its mortality assumptions by looking at the aggregate measures of period life expectancy at birth and at 65. In history, these are derived for each period for both sexes from single-years-of-age average death rates via life-table calculations. Life expectancy assumptions are set out to the end of the projection horizon (2061) by looking at historical trends and comparisons with other countries having similar populations. They are then broken out into death rate projections and survivorship projections for each single year of age, and sex for each year to 2061.

Period life expectancy is based on mortality rates in a particular period. This is the life expectancy if mortality rates did not change from that period onwards. Cohort life expectancy, in contrast, is based on mortality rates experienced by a birth cohort (people born in the same year) over their lifetime. Cohort life expectancy therefore gives the most authoritative measure of how long people have actually lived. If mortality rates are falling from year to year, cohort life expectancy will be higher than period life expectancy.

For example, the New Zealand period life expectancy in 2005-07 of males aged 65 is 18 years. By comparison, and partly based on medium projections of remaining mortality, the cohort life expectancy of (non-Māori) males born in the early 1940s and reaching age 65 in 2005-07 is 20 years, while the projected cohort life expectancy of males born in 2005-07 and reaching age 65 in the early 2070s is 23 years.

Figure 3.5 - Period life expectancy at birth
Figure 3.5 - Period life expectancy at birth.
Source: Statistics New Zealand.

Note: The data break occurs in 1950-52. Before that, Non-Māori data; afterwards, total population. The fans at the end of each line depict the high, medium and low assumptions.

As noted above, life expectancy at birth has risen over the past 100 and more years. At first, the change came from lower mortality in early childhood. In recent decades, the greatest gains in life expectancy have come from reduced death rates among late working and retirement ages (50-79 years). Figure 3.5 shows the gains in life expectancy at birth from 1880 onwards and includes Statistics New Zealand's assumptions to 2060. The medium period life expectancy for females reaches 88 years and for males 84.5 in that year, while the high and low brackets around these mediums is ±2.5 years for males in 2060 and ±2.0 years for females. The rate of growth of longevity is assumed to tail off through time.

3.2.3  Net migration assumptions

Migration in and out of the country has varied widely through time. As a settler society, New Zealand has had periods of large inflows: from Europe after the Second World War, from the Pacific in the 1970s and later. More recently, New Zealand has had large inflows from Asia and South Africa. The outflows incorporate the desire for young Kiwis to have an overseas experience during their 20s.

New Zealand has a higher percentage of its skilled workforce living overseas than any other country in the OECD - nearly one in four highly skilled Kiwis is offshore (Dumont and Lemaître, 2005). This means that we have one of the highest proportions of skilled labour no longer working here. Clearly migration has been an important factor on the shape of our population (and labour force) and is likely to continue to be so in the future.

Figure 3.6 - Net migration
Figure 3.6 - Net migration.
Source: Statistics New Zealand

Statistics New Zealand has set its assumptions of future net migration based on averages over the recent past. The long-term medium assumption is 10,000 people a year. The medium assumption is bracketed by 5,000 for the low case and 15,000 for the high. This is one example where future trend assumptions are based on historical averages. The past has been affected by policy changes and picking where these might go over 40 years is difficult. The medium assumption is based on a two-decade average.

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