New Zealand’s Economy – Immigration

“Economics is thinking about money and all the things that money represents.” Liam Dann.

New Zealand's Economy

New Zealand’s economy seems to be following international trends. For example, we have an aging population with a low birth rate; the economic implications for New Zealand are impactful and long-term.

Labor shortages. With fewer young people and more retirees, the working age population shrinks, leading to labor shortages and making it harder to support economic growth and public services.

Slower economic growth. Lower birth rates mean reduced economic output, which can create a negative cycle. Less growth leads to more financial pressure on families, further discouraging births.

Rising fiscal pressures. And all the population increases demand for healthcare pensions like New Zealand superannuation and aged care. Australian government budgets.

Changing consumer consumption patterns. Older populations. Spend more on healthcare and less on things like education and housing. Shifting economic demand.

Savings and investment. As more people retire, National Savings rates may fall. Potentially impacting investment and asset prices.

Migration dependence: with fertility below place replacement (1.52 in2024), population growth increasingly relies on migration, making immigration policy crucial for economic stability.

Without policy changes. These trends could undermine New Zealand's long-term economic and fiscal health. Governments use incentives to attract immigrants to the country, to fill the gaps in the economy that an aging population and a low birthrate create.

Immigration

New Zealand has had an active immigration policy in various forms for several decades. More immigrants are needed, even while a significant number of Kiwi citizens are on jobseeker benefits. In a New Zealand Herald article, commentator Liam Dann, explains that immigrants contribute to economic growth by increasing consumption, investing, and bringing in new skills and capital. He also points out New Zealand's aging population and low birth rate, which necessitate immigration to maintain a working-age population. A "zero-immigration experiment" in 2021 led to labour shortages and inflation, emphasizing that the primary challenges with immigration are related to infrastructure and housing, not employment.

Flexible Policies

Liam Dann also highlights the unpredictable nature of financial markets, using the recent Iran conflict as an example of rapid fluctuations in oil prices and share markets. This volatility underscores the need for flexible economic policies, particularly regarding interest rates. Finally, he mentions that ANZ economists have revised their New Zealand GDP forecasts downward for the second quarter, expecting slower near-term growth but a recovery into 2025, with stronger momentum in 2026 and 2027, driven by domestic demand and an improving labour market.

Cost of Living

Although necessary for the viability of the New Zealand economy, immigration puts pressure on rents and housing. Geopolitical issues contribute to transportation costs for businesses and households. These factors and interest rates all increase the cost-of-living expenses for everyone, particularly for those with young families and low incomes.

Filling the Gaps

There is no doubt immigration has added diversity and culture to the richness of what defines a Kiwi. Cuisines from all over the world can now be found in every city. Immigrants have filled vacancies in skilled occupations that were in short supply and did the work that locals did not want to do. Economically their contribution has been immense increasing productivity of the country.