Record migration in 2023: Four ways it changed the economy
Friday, 16 February 2024
New Zealand’s population grew by a net 126,000 migrants over 2023, the largest number on record for a calendar year.
Stats NZ population indicators manager Tehseen Islam said the increase was similar to the number of people living in the Taranaki region.
So what has been the impact of the influx on the economy?
Housing
People moving into the country need somewhere to live, and while the impact of the migrant numbers on the for-sale market has been muted, the effect is more noticeable on rents.
Rents increased at a pace about double the average at the end of last year.
BNZ chief economist Mike Jones said there were not enough homes being built to keep up with the population growth. “It’s contributing to strong rental inflation. Rent for new tenancies in some parts of the country are up 10%.”
Gareth Kiernan, chief forecaster at Infometrics, said migration had probably been a contributing factor the housing market stabilising through 2023, and prices and activity picking up a bit.
“I’d be surprised if we don’t see a bit more of an effect flowing through to the housing market through 2024. Typically when you arrive in a country, you don’t buy a house straight away. If you’re in a position to purchase, it takes time to work out exactly where you want to live, where your work situation will end up being, that sort of thing.”
Jobs
Jones said one of the biggest impacts of migration had been on the labour market.
“The labour market has basically been flipped around 180 degrees almost solely by migration. Now you’re looking at a labour market that’s actually oversupplied. When you think about the situation we were in 12 months ago, that’s pretty remarkable. The ‘staff wanted’ signs have rapidly disappeared from shop windows and 90% of that is migration.”
He said there were now record numbers of job applications per ad. “It’s much easier to find labour, that has taken all the steam out of the labour market.”
Migrants had generally gone to the areas where there had been skill shortages, such as construction, labouring, hospitality and healthcare, he said. “Migrants tend to follow opportunity, follow jobs. By the same token we’ll probably see a reasonable slowdown in migration this year, job ads are down 30% or 40%.”
Infrastructure
Kiernan said the country’s infrastructure problems could be heightened by an increased population.
“Given we know part of the housing undersupply issue of previous years and arguably currently has been a function of the availability of land and in some cases the infrastructure associated with making land available, it does raise risks around medium-term housing supply implications.”
He said there would be a need for more infrastructure both related to housing and existing networks.
“Water provision, transport – those are the obvious ones we see stretched anyway in parts of the country. If we have more people in the country and networks are not coping with the existing population they won’t cope with a lot more people, either. These things take a lot longer to become apparent… given the current infrastructure problems I would be a bit concerned about how that might evolve over the next two or three years.”
Demand
There had been concerns that the growing population could put pressure on demand for goods, at the same time the Reserve Bank is trying to cool it to get inflation down.
Kiernan said the bigger population had probably added demand, even though retail sales volumes had been falling.
“If you didn’t have migrants coming in you could argue the falls could have been even greater.”
He said there could be flow-on inflation implications but skill shortages had been such a problem that easing the supply side for businesses, with more workers allowing more production of goods and services, was probably more important.
“The jury is still out but the evidence would suggest the supply side has outweighed any inflationary demand effect that might otherwise have occurred.”