Archive | Economy

Migration – quick numbers

Below are the basic migration numbers for the month of August & 12 months to August. I’ll fill in some gaps this afternoon with a longer story, including a few inputs likely to change the trend.

The bald statistics:

Net migrant inflow August: 5120 (5450 in August last year)
Net migrant inflow August year: 72,072 (69,119; 72,402 in the 12 months to this July)
Migrants into Auckland in August: 4683 (4430)
Migrants into Auckland in August year: 59,700 (53,365)
Net Auckland inflow in August: 2754 (2711)
Net Auckland inflow in August year: 36,796 (32,187).
Net outflow to Australia in August: 330 (22 inflow)
Net outflow to Australia in August year: 1464 (2588).

Attribution: Statistics NZ tables & release.


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Old athletes & Lions drive NZ to slimmer deficit

Statistics NZ said yesterday a record high $1.3 billion services surplus and a smaller primary income deficit narrowed New Zealand’s current account deficit to $1.6 billion in the June quarter.

More economic statistics are due out this morning: the GDP figures and the monthly migration figures.

Statistics NZ said New Zealand exported a record $5.8 billion of services in the June quarter, seasonally adjusted, while importing a record $4.5 billion of services.

The increase in services exports was driven by $3.7 billion of spending by overseas travellers in New Zealand (exports of travel services): “This is the largest ever seasonally adjusted export of travel services. Part of this increase was due to the World Masters Games in April, and the British & Irish Lions Rugby tour to New Zealand in the June & September quarters.”

Overall, the seasonally adjusted goods & services balance in the June quarter was an $834 million surplus.

Stronger goods exports reduced the seasonally adjusted goods deficit for the quarter to $446 million, down from $1.1 million in the March quarter.

Statistic comparisons

  • For the year ended June 2017, New Zealand’s current account deficit was $7.5 billion (2.8% of gdp; it was 2.7% of gdp for the June 2016 year)
  • The seasonally adjusted current account balance was a $1.598 billion deficit in the June quarter ($1.187 billion smaller than the March 2017 quarter’s deficit)
  • The goods deficit decreased $677 million to reach $446 million
  • The services surplus increased $295 million to reach $1.280 billion, the highest on record
  • New Zealand’s primary income deficit decreased to $1.910 million in the June quarter, $403 million smaller than in the March 2017 quarter
  • New Zealand’s secondary income deficit increased to $522 million in the June quarter, $188 million larger than the March 2017 quarter deficit
  • The capital account balance was a deficit of $14 million for the June quarter, down from the surplus of $3 million in the March quarter
  • The financial account net inflow was $110 million for the June quarter, an increase from the revised financial account net outflow of $787 million for the March quarter
  • New Zealand’s net international liability position was $154.2 billion (57.5% of gdp) at 30 June, up from a revised $153.0 billion at 31 March but down slightly as a percentage of gdp (57.8%)
  • New Zealand’s net external debt position was $145.5 billion (54.3% of gdp) at 30 June, up from a revised net external debt position of $144.4 billion (54.6% of gdp) at 31 March
  • The outstanding reinsurance balance for the Canterbury earthquakes is $1.3 billion while the outstanding balance for the Kaikoura earthquakes is $991 million. Revisions to recognised reinsurance claims for the Canterbury & Kaikoura earthquakes are reported in the quarter when the earthquakes occurred.

Attribution: Statistics NZ release.

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Fed holds rate after hurricanes, envisages treasuries selldown start next month

Hurricane damage beat job gains in the US Federal Reserve’s short-term economic assessment out today, and the central bank’s open market committee opted to keep its federal funds rate target range at 1-1.25%.

The bank gave 2 lines at the end of its summary to its treasuries selldown, which it said would start in October. The bulk of the statement issued today, though, is the usual blather.

I’ve also linked below to the Fed’s economic projections, out today, but haven’t written about them.

Here’s how the bank expressed its assessment, leading to a 9-0 vote:

“Information received since the committee met in July indicates that the labour market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have remained solid in recent months and the unemployment rate has stayed low. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters.

“On a 12-month basis, overall inflation and the measure excluding food & energy prices have declined this year and are running below 2%. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

“Consistent with its statutory mandate, the committee seeks to foster maximum employment & price stability. Hurricanes Harvey, Irma & Maria have devastated many communities, inflicting severe hardship.

Storms only a short-term delay

“Storm-related disruptions & rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labour market conditions will strengthen somewhat further.

“Higher prices for gasoline & some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, inflation on a 12-month basis is expected to remain somewhat below 2% in the near term but to stabilise around the committee’s 2% objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely.

“In view of realised & expected labour market conditions & inflation, the committee decided to maintain the target range for the federal funds rate at 1-1.25%. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labour market conditions and a sustained return to 2% inflation.

“In determining the timing & size of future adjustments to the target range for the federal funds rate, the committee will assess realised & expected economic conditions relative to its objectives of maximum employment & 2% inflation. This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures & inflation expectations, and readings on financial & international developments.

“The committee will carefully monitor actual & expected inflation developments relative to its symmetric inflation goal. The committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Treasuries selldown programme

“In October, the committee will initiate the balance sheet normalisation programme described in the June 2017 addendum to the committee’s policy normalisation principles & plans.”

In the June statement, the committee anticipated an initial cap of $US6 billion/month in treasury repayments, rising in $US6 billion steps at 3-month intervals over 12 months until it reaches $US30 billion/month.

For payments of principal that the Fed receives from its holdings of agency debt & mortgage-backed securities, the committee anticipated in June that the cap would be $US4 billion/month initially and would increase in $US4 billion steps at 3-month intervals over 12 months until it reached $US20 billion/month.

Today: Federal Reserve Board & Federal open market committee release economic projections from the September 19-20 FOMC meeting
14 June 2017: FOMC issues addendum to the policy normalisation principles & plans

Attribution: Fed release.

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Updated: Reserve Bank sublets to help pay the rent

Published 4 September 2017, updated 6 September 2017:
The Reserve Bank has gone further into commercial sub-leasing – not because it saw how to use space better, but to meet its schedule of payments to the Government. The NZ Defence Force has signed a lease to occupy 3 floors in the Reserve Bank building in Wellington, beginning sometime in the next 4 months (the bank said ‘later this year’).

Update paragraph: The bank told me yesterday it owned the building and wasn’t subletting. In my shorthand I called it subletting because the bank is leasing out space so it can pay its owner, the Government, not because it didn’t need the space. Strictly, it’s a lease. In effect, the bank’s not an owner in control.

The bank’s head of currency, property & security, Steve Gordon, said today the Defence Force would be the fourth tenant in the building, joining the Parliamentary Counsel Office, Parliamentary Commissioner for the Environment and the State Services Commission.

He said the bank had vacated the floors being leased to the Defence Force as part of a strategy to increase its property income to meet its funding agreement.

The bank has been leasing space in the building, at No 2 The Terrace, since at least mid-2016.

Mr Gordon said the appeal of the building lay in its top seismic rating & proximity to Parliament. The building is being refurbished to modernise its interior.

Attribution: Bank release.

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Migrant inflow edges up, big flow into Auckland

New Zealand’s net inflow of migrants clicked up another notch last month as the immigrant number jumped over 12,000 and the net for the year rose by 97 from June to 72,402 for the 12 months to July.

One figure in the equation has been fairly static: emigration has been running at about 5000/month, though it edged up above 5800 this July.

On the other side of the ledger, more immigrants arrive in July than in June, and those July arrivals have ramped up in the last 4 years, exceeding 10,000 in 2014, 11,000 in each of the next 2 years and reaching 12,390 last month, compared to 5843 exits.

The net inflow has been around 6500 for each of the last 3 Julys, 6547 this time.

There was still a net inflow from Australia for the year, but not for the month – a net outflow of 11 for the month (1866 arriving, 18877 leaving) and a net inflow of 469 for the year (25,428 in, 24,959 out).

The net inflow from India was well down for the year – 9267 in (12,508 last year), 1823 out (1195) for a net inflow of 7444 (11,313).

The net inflow from China for the year was 9961 (10,110) – 12,276 in (12,220), 2315 out (2110).

From the UK, the net inflow rose by 2366 to 6750 (4384) – 15,216 in (13,624), 8466 out (9240).

New Zealanders are still heading overseas, albeit the net outflow has shrunk. The July outflow has been around 2900 for 4 years (2949 this time) and the inflow was around 2300 for 3 years, but rose to 2604 this July. The net outflow for the month was 345 (517).

The net outflow of Kiwis for the last 6 years has been: 39,682 in the 12 months to July 2012, the, 29,932 in 2013, 11,004 in 2014, 5597 in 2015, 3069 in 2016 and 1112 this year.

Auckland migration

Migrant arrivals into Auckland were up in July at 5440 (5069), and by 6234 for the year to 59,447 (53,213). The net inflow into Auckland for the last 3 July years has risen from 27,395 to 31,951 to 36,753 (up by a net 4802 in the last 12 months).

Attribution: Statistics NZ tables.

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Immigrants drive 2%/year population growth, 10-14yos decline

New Zealand’s population grew by over 2% in each of the last 2 June years, and by a record 100,400 in the last 12 months.

Over the last 5 years, the population grew by nearly 390,000 – exceeding the population of Christchurch.

At 30 June, Statistics NZ estimated the resident population at 4.79 million. By tonight, it exceeded 4.8 million – 4,805,505 on the Statistics NZ population clock as I write.

Over the last 4 years the natural increase has been under 30,000/year, compared to annual increases up to 36,200 during the previous 7 years.

The migrant figure went negative in the June 2012 year – 3200 more people leaving than arriving – but in the last 4 years the net migrant inflow has totalled 238,000, of whom 72,300 have arrived in the last 12 months.

Statistics NZ said the current gain from net migration equated to 15 people:1000 population. Population statistics senior manager Peter Dolan said much higher net migration rates were experienced in the late 1870s, and similar rates to today were also experienced in the early 1900s & early 2000s.

“Our current net migration rate is high by New Zealand standards, but historically it has fluctuated more than other countries. At the moment we’re experiencing rates similar to Australia’s in 2009.

“Most migrants are arriving on short-term work & student visas. However, many of them extend their visas, or transition to other visa types including residence visas. It makes sense to count long-term stayers as part of our population, rather than as short-term visitors.”

Mr Dolan said half of last year’s growth was in the 15–39 age group: “This reflects the contribution of migration to our population growth, with net migration of 50,000 among those aged 15–39 years.”

As a result of recent migration flows, the share of New Zealand’s population aged 15–39 years rose from 33% in 2013 to 34% in 2017. This was a reversal of the trend that saw that bracket’s share drop from 41% in the mid-1980s.

Growth of the broad 65+ age group has continued to accelerate, up 25,000 in the last year, as the large birth cohorts of the 1950s-early 1970s begin to reach those ages.

The population at the oldest ages is also growing, reflecting decreasing death rates at all ages over a long period of time. The 90+ population is now 30,000, compared with 20,000 in 2007. It’s projected to reach 40,000 in the late 2020s and 50,000 in the early 2030s.

One group that has increased more slowly is the under 5s – up by just 800 in the last year and by 12,720 over 10 years. The 10-14 age group’s numbers rose in the last year, but both the last 2 years were lower than 10 years ago – 306,380 in 2007, 294,330 last year, 301,360 this year.

Link, and links to graphs:
National population estimates at 30 June 2017

Attribution: Statistics NZ release & tables.

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Half the record net migrant inflow is into Auckland

The net inflow of migrants continued to rise in June, reaching a record 72,305 for the June year – and 50% of that total was into Auckland.

Immigrants giving Auckland as their destination rose by 6142 to 59,076 for the 12 months, rising from 42.3% to 45% of all immigrants. The number not giving a final destination fell from 21,244 (17%) to 18,840 (14.3%).

The meteoric rise in net immigration over the last 5 years – from a net outflow of 3191 in the June 2012 year – has resulted from a combination of rising immigrant numbers and declining emigrant numbers. But in the last 12 months that picture has changed slightly.

For June, the number of immigrants was up by 950 to 9158, continuing a steady rise since 2010. On the departures side of the ledger, emigrants dropped to 4534 last June but rose to 5145 last month.

For the June year, arrivals rose from 82,305 in 2010 to 131,355 in the last 12 months, with big jumps in 2014-216, slipping back to a rise of 6300 in the last months. Departures declined from 87,593 in the June 2012 year to 55,965 in the June 2016 year, but bumped up to 59,050 in the last 12 months.

For Auckland, the net inflow in June was 2106 (1726 & 1571 in the previous 2 years). For the June year, the net inflow rose from 26,834 to 31,778 to 36,650 – 50.7% of the total net inflow.

The number of immigrants from Australia dropped slightly for both month & year – by 70 for the month to 1612, and by 262 for the year to 25,441.

Exits to Australia rose for both month & year – by 160 to 1781 for the month, and by 1111 to 24,881 for the year. The net gain shrank from 1933 to 560 for the year.

Other major immigrant sources for the year were China with a net inflow of 10,351 (9688 the previous year), India 7409 (12,118, down chiefly because student visa numbers declined), the Philippines 4646 (5010), the UK 6728 (4138) & South Africa 4867 (3054).

Attribution: Statistics NZ tables & release.

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Inflation hits zero for quarter, 1.7% for year

The consumers price index (CPI), which hadn’t shifted more than half a percent in any quarter since September 2013, rose by 1% in the March quarter this year, and then stopped on zero in the latest quarter to June.

Since that 0.9% rise in September 2013, which bumped the annual movement up to 1.4%, the index has been as good as zero while property inflation has raged. But that’s eased off now as well, and the annual rate of CPI inflation has fallen back from 2.2% to March, down to 1.7% to June.

Statistics NZ the latest shift, seasonally adjusted, was a 01% decline.

Statistics NZ senior manager Jason Attewell said: “Household basics like rent, food & electricity all hit consumers’ pockets harder this quarter. Offsetting these price rises were falls in domestic airfares & petrol prices – which fell on average by 4c/litre.”

Housing-related prices continued to increase, up 0.8% from March to the June quarter, and to 3.1%/year. Prices for newly built houses excluding land rose 1.8% this quarter. Regionally, Auckland had the largest increase in the June quarter (up 3.0%), followed by Canterbury (up 0.8%) & Wellington (up 0.5%). Seasonally higher prices for electricity (up 1.5%) were the second highest contributor for the housing group. Housing rentals rose slightly (up 0.4%), held down by a 1.6% fall for Canterbury.

Attribution: Statistics NZ tables & release.

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The migration debate: Which way forward?

Statistics NZ will publish the monthly migration figures this Friday and, on recent trends, the net inflow is likely to be just over 72,000/year. The Labour Party believes it can cut that by 20-30,000/year by enforcing rules more tightly.

Gareth Kiernan.

On Friday, economist Gareth Kiernan warned that cutting the number sharply could cause a slump. Mr Kiernan’s premise seemed to be that more migrants were needed to service the needs of more migrants, and that cutting the number of migrants would take away the workforce needed to service those extra migrants.

His second point was not about migrants but about the behaviour of the Reserve Bank. His slump would arise not so much from cutting immigration but from the central bank ignoring changes in the economy and raising interest rates anyway, thus harming the economy.

All political parties agree that immigrants should add to New Zealand, not detract, and the Government’s critics take that a step further, saying the direction “export education” has taken, toward low-level learning & backdoor entry to permanent residency status, should therefore be curtailed.

Who builds our houses?

The first irony in New Zealand’s immigration debate is that many of the companies building much-needed houses in Auckland are owned by immigrants, often with investor support in Hong Kong or China.

You could say that, without so many immigrants from Asia, the input of these Chinese builders wouldn’t be needed. However, 2 of New Zealand’s biggest housing companies through decades, Universal & Neil, have been Asia-owned for years. A third, GJ Gardner, is an Australian franchise. Would New Zealand have built as many houses as it has in recent years without that foreign input?

How to get voters to switch – or not

The second irony is that, since 1972, no party (or party in coalition) has held power beyond 3 consecutive terms, but Labour & the Greens appear determined to hand National a fourth term because they haven’t enunciated policies which will pull voters to them from outside their bases.

As I was writing this, a new campaign call for support arrived in my inbox from the Greens. In the middle of its worthy aspirations was this sentence: “To do this, we need to you.”

We all make mistakes, but I read that puzzling sentence shortly after trying to wade through the party’s verbiage on migration, which read more like a call to support refugees and close the door to people the party doesn’t like, notably rich people.

Under policy point 5, Selecting voluntary migrants, I took greatest delight in point 4, which followed a statement that “people shouldn’t be able just to buy their way into Aotearoa”:

  1. Tighten up on scams in which overseas millionaires buy up NZ property by making business-development promises that they don’t keep. We will do this by
  2. Using a 3-year provisional visa for investor migrants
  3. Undertaking annual audits of investor migrants’ businesses via extended case management, paid for by the business being audited
  4. Ensuring that the audits include checks for viability, sustainability & desirability and are undertaken by immigration officials, an accountant & a marketing consultant. These audits, prepared independently, together with a police report & any complaints, will form the basis of the decision.

I’ve always found the chip-on-shoulder view of life is as distorted as the silver spoon version, and bludgeoning aspiring Kiwis with this vengeful kind of red tape doesn’t seem a good way to make friends.

Labour acknowledges migrant heritage, but…

The Labour Party acknowledges New Zealand’s immigrant heritage in its policy, but says National, in its 9 years heading the Government, “has failed to make the necessary investments in housing, infrastructure & public services that are needed to cope with rapid population growth. This has contributed to the housing crisis, put pressure on hospitals & schools, and added to the congestion on roads.”

Labour, in government, had an immigrant spike in 2003-04 – unannounced, unmanaged and, because local councils had no warning of the influx, they weren’t prepared to cope with it. The economic boost helped the party get re-elected in 2005. National’s spike of the last 3 years has gone for longer, but both have left large infrastructure deficits and speculation-promoting price escalation as direct consequences.

Labour reckons it can cut net immigration by 20-30,000/year.

That’s going to happen anyway as soon as Australia gets back on to what had been assumed to be a never-ending economic growth path, so the immigration cut in New Zealand could go deeper, reducing the net inflow to 10-20,000/year.

Australians thought wrecking the economy was beyond the ability of any politician, but finally they found a couple who could do it. However, the mining sector is looking more positive by the day and “the lucky country” will soon be just that again, and thereby thoroughly inviting to thousands of New Zealand tradesmen.

When those tradesmen start to head west again, New Zealand will once more be left pondering how to fill the gaps. Kneejerk responses aren’t an effective alternative to sound long-term policies, but kneejerk is where the migration debate has headed.

GST sharing rebuff was an opportunity missed

The National government’s unwillingness to share gst windfalls from the rise in tourist numbers made it plain that the governing party’s floundering was exasperating business people around the country; an opposing party that offered a raft of constructive new economic policies incorporating changes to tax distribution could have lifted its vote immensely.

Slump talk

Mr Kiernan, Infometrics’ chief forecaster, thrust his tuppence-worth into this policy abyss on Friday, when the economic forecasting company’s latest predictions indicated gdp growth would slip below 2%/year this year – before any further help downward from politicians slashing migration.

The threatened migration clampdown would lead to an economic slump, he wrote, adding: “New Zealand’s economic growth is being constrained by shortages of labour in key areas, and this problem will become more widespread if there is a significant & rapid tightening in migration policy following this year’s election”.

Slower near-term growth in construction activity & household spending would cut growth, he said.

“Although growth is forecast to rebound during 2018, that pick-up is contingent on the continued supply of labour provided by foreign migrants coming to New Zealand for work, on which businesses have become increasingly dependent.

“High levels of immigration have undoubtedly contributed to stresses around infrastructure & the housing market, particularly in Auckland. But employment growth of more than 1%/quarter over the last 18 months demonstrates the need for workers across the economy.

“Without these inflows of foreign workers & returning New Zealanders, businesses would have struggled to meet growing demand, and cost pressures would be even more intense in areas such as the construction & tourism sectors.”

Mr Kiernan’s warning invites the question: If the number of immigrants falls, so too will demand, and the economy should become more manageable, supposedly enabling a catch-up in the supply of infrastructure & houses. A slowdown, yes, but a damaging slump?

Mr Kiernan said cutting immigration this year would have negative repercussions for economic growth during 2018 & 2019, constraining activity through higher labour costs: “The inflationary risks associated with these cost pressures would also be likely to compel the Reserve Bank to raise interest rates sooner than would otherwise be the case.

“Given the slowdown already occurring in sales activity & house price growth, this potential cocktail of rising interest rates mixed with a government clampdown on migration would be lethal.

“Even with modest increases in interest rates from mid-2018, medium-term growth in household spending will be constrained by high debt levels, which have climbed from 146% to a record high of 167% since 2012.

“Faster lifts in mortgage rates & debt-servicing costs would threaten a jump in forced house sales, hastening a correction in the housing market and hammering consumer confidence.”

Those supposed consequences look like consequences of not adjusting policy to match changed conditions.

Mr Kiernan said the surge in migration over the last 4 years could have been more carefully managed, thereby preventing the housing market imbalances from becoming so critical. But, although he expected net immigration to gradually ease over the next 5 years, “a cautious approach is needed to avoid replacing one lot of problems in the economy with a completely new set. Ultimately, high migration levels are a positive reflection on New Zealand’s economic performance. We’ve been able to attract & retain workers in this country because our growth over recent years has outpaced that in other developed economies.”

Not quite true. A high proportion of immigrants have been low-level students-come-menial workers who have held bottom-rung wages down. At the same time they have increased demand for services, and for housing.

While I’ve said Labour hasn’t enunciated policies that would pull voters from other parties, elaborating on how a reduction in immigration would be done – and what it would achieve for other groups – would rebalance the political scales.

Links to party immigration policies:
NZ First
TOP (The Opportunities Party)

Attribution: Infometrics release, party policies.

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Net migrant inflow just short of 72,000/year

The net inflow of migrants dropped slightly from April to May and fell 36 short of 72,000 for the year to May, according to Statistics NZ’s monthly figures released yesterday.

Statistics NZ also released a study yesterday of migrants from other countries using the easier entry to New Zealand as a backdoor way of getting into Australia (link below). That flow spiked in 2001, when Australia changed its welfare rules, and has fluctuated since.

The present rise in net immigration began in 2014 and the net inflow has doubled since then.

The annual net inflow hit 71,885 in April and rose to 71,964 in May, but the net inflow for the month of 3117 was down from April’s 3406.

Compared to last year’s figures, the monthly net inflow was up by 79 on last year and up by 3532 on the previous year.

The number of migrants arriving on student visas has dropped by 4000 to 23,700 for the year, principally affecting migration from India, which dropped by a net 4681. Net immigration from the UK jumped by 2592 to 6534 for the year, and from South Africa by 1801 to 4729. The net inflow from China was up by 551 to 10,218 for the year.

Net migration into Auckland for the month was 1899 (1493 last May), and for the year 36,270 (31,623).

Statistics NZ paper, 22 June 2017: Backdoor entry to Australia

Attribution: Statistics NZ tables & release.

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