As the border slowly returns to a more permeable state, the Productivity Commission will present its case on whether New Zealand has an over-reliance on migrant labour
New Zealand’s population has had a growth spurt over the past decade, when compared with the rest of the OECD.
In 2016, unprecedented growth was seen at 2.2 percent a year - levels not seen since the early 1960s.
According to the Productivity Commission, a Crown entity tasked with lifting New Zealand’s productivity, the reasons for this relatively rapid growth were high resident numbers and largely uncapped temporary migration programmes.
Newspaper headlines about the ‘brain drain’ and skilled labour shortages being filled in by recent migrants were common occurrences through the 2010s - and along came a virus.
Overnight, the flow of migrants was cut down to a trickle, calling for fast-tracked changes across almost every economic sector.
Now as the border slowly returns to a more permeable state after two years of stasis, the Productivity Commission is evaluating what this means for New Zealand’s immigration policy and whether the country’s reliance on migrant labour could be labelled an objective over-reliance.
After months of research and public consultation, the commission is preparing a report on the impact of differing levels of migration to be presented to ministers in the Government on April 30.
The preliminary report highlighted the significant role immigration has played in supporting New Zealand’s population growth.
Along with this came a heavy reliance on temporary migrant workers, a potential source of volatility and economic uncertainty in the case of borders being closed.
Before March 2020, New Zealand had an annual population growth of just over 2 percent, around two-thirds of that from immigration.
Since then, it has dropped to a growth rate of 0.6 percent. That means this country went from having some of the highest annual growth rates in the OECD to being bang on average.
Massey University sociology professor Paul Spoonley specialises in how social change and demographics affect political decisions.
He said the issue of immigration is a difficult equation for New Zealand to balance, with benefits and consequences on either side.
“There are two sides to the issue because as we've seen, lots of the labour market in New Zealand rely on either temporary or permanent migrants,” he said. “So to actually build houses or infrastructure like roads, we’ve become very reliant on migrant labour.”
On the other hand, he noted that rapid growth also requires a matched pace in infrastructure development, especially in quickly growing cities like Auckland or Tauranga - two cities Spoonley said have “an historic deficit in terms of infrastructure”.
If infrastructure already isn’t fit for purpose, he said rapid population growth can enact enormous pressure.
So there’s a delicate balance to strike if New Zealand moves back to its prior reliance on migration. Other factors to consider include benefiting from other countries’ investment in human resources.
“What we get in terms of our skilled migrant category, where the majority of our permanent migrants were approved, is somebody whose life up to this point, including their skills, training and experience has been paid for by another country,” he said. “If we're getting the surgeon from South Africa or the roading engineer from India, we didn't make the investment but we are going to be the beneficiary of their skills.”
New Zealand’s immigration profile has changed in recent years, shifting from a focus on permanent migration to more migrant workers being here on work, student or visitor visas. Temporary work visas in particular have grown to represent a much larger chunk of all arrivals since around 2010.
The commission pointed to this increase in the temporary visa load as a result of policy choices made by governments in response to demands from employers for workers, an increase in international students and the points system for New Zealand residency privileging those who have already had work or study experience within the country.
But as the dust of these initial Covid years settle, many countries share the same gaps in the labour market that they are now likely to try to fill.
Spoonley says it will be a competitive market as migration resumes over the next two or three years.
“The labour crunch which Covid has accelerated is common to other countries, so what we are then doing is competing for migrants with Australia, the UK, the USA or Canada,” he said. “At the same time, they will also try to recruit out of New Zealand, in particular skilled New Zealanders.”
Could this mean a return to the ‘brain drain’ days of 2012, when a group the size of a packed-out Eden Park left for Australia?
Spoonley’s best guess is the number of Kiwis packing their bags for environs further afield will be somewhere between those seen in 2012 and now.
“I don't know to be honest, but will we see our new graduates and some of our skilled workforce leaving to another country? Absolutely,” he said. The outflow will be seen particularly to countries that can put a premium on attracting people - whether with higher incomes or lower cost of living, pull factors that have long had Kiwis set their sites overseas.
“Australia can pay a third more,” Spoonley said. “So will we see a net outflow of New Zealanders? Almost certainly. I'm just not clear on the size of that. What I am clear about is that many of them will be highly skilled and we can't afford to lose them.”
He said it’s a looming retention issue for the New Zealand economy, where the biggest reasons for people to stay put will be family or friends.
“Other countries will be outbidding us in terms of pay and conditions.”
