NZ net migration down in August, cycle looks like its turning – Westpac

August saw a net inflow of 5,490 people into New Zealand on a permanent or long-term basis, down from 5,800 in July, notes Satish Ranchhod, Acting Chief Economist at Westpac.

Key Quotes

“Migration levels have fallen in both of the past two months, and are now noticeably below the levels we saw earlier in the year.”

“The softening in monthly inflows has seen annual net migration easing back from 72,400 in the year to July to 72,100 in the year to August. That’s still a very high level. But recent developments suggest that the peak in the migration cycle may now have passed, and we could see further declines going forward.”

“Underlying the slowdown in net migration has been a pickup in departures of non-New Zealand citizens, which have risen from around 1,800/month last year to 2,300/month now. This group includes people who would have come over in recent on temporary work and student visas. Typically those who come over on these programs stay for around three to four years. Given that the surge in foreign arrivals began in 2013, we have been expecting to see a corresponding surge in departures – that looks to have finally arrived.”

“At the same time, the number of new arrivals has flattened off, as has the number of New Zealanders returning from abroad.”

“Implications

• Population growth and migration have been key factors that have propped up demand and GDP growth in recent years. This has masked what has actually been quite modest increases in economic output in recent years on a per-capita basis (as was reflected in today’s June quarter GDP growth figures).
• Our forecasts have incorporated a slowdown in net migration for some time, with earlier strength in arrivals expected to be followed by a lift in departures. We’re now seeing this occurring, and it may be coming through even faster than we had been expecting.
• This reinforces our expectations for softer GDP growth over the coming years, especially as it comes on top of other signs that the economy is losing momentum, including the slowdown in the housing market. Lower net migration would also imply less of a boost to spending going forward. Depending on the makeup of migration, this could also be important for the labour market and the mix of skills in the economy.”