Migration a blessing or curse depending on perspective

It's much easier to generate economic growth when you've got a rising population. Photo / Brett Phibbs

Opinion

Most people will be aware that migration is at a record high, but it is still underappreciated just how influential and wide-ranging the effects of this have been on our economy, our corporate sector and our housing and financial markets.

In the past year, net migration has totalled a little more than 60,000 people, the highest ever. The previous all-time high was back in 2003. This was surpassed in August last year, and each consecutive month since then has brought a new record high.

For a country of just 4.5 million people, that equates to an annual gain of about 1.3 per cent. It's much easier to generate economic growth when you've got a rising population, in aggregate at least.

Local businesses have benefited strongly from this, as more people means more potential customers, leading to better sales and higher profits. This can be seen in the financial results of the more domestically focused companies on our sharemarket during recent years.

High migration has also had an impact on our labour market. The number of people employed has risen for the past eleven quarters, the strongest period in a decade, yet our unemployment rate has been rising.

Employers have benefited from this dynamic, as they've had a bigger pool of talent to choose from, while wages pressures have been subdued. For similar reasons, the average worker has probably seen more harm than good from these migration trends.

Around half of the 60,000 migrants arrive in Auckland and don't go any further, which goes a long way to explaining Auckland house prices. It's not only about speculation, fundamentals are also playing a role.

Migration has also influenced Reserve Bank policy. More economic activity has kept demand ticking over, although new workers have added to supply. With this limiting wage growth and inflation pressures, interest rates have stayed low.

We're still gaining people from India, China, the Philippines and the UK, but the faltering Australian economy has been the biggest driver of all this.

In the past year, we've lost just 529 people to the country formerly known as lucky. That's the lowest since 1991, when Australia was last in recession. It's also a far cry from the near 40,000 people that left for Australia in the same period four years ago.

It looks unlikely over the next two to three years, but at some point Australia will get itself back on track. That could be what ultimately slows migration to more normal levels and sees some of these things start to unwind, including Auckland housing trends.

Migration can be a double-edged sword, and whether you see it as a blessing or a curse depends on your perspective.

Existing homeowners have been beneficiaries, while those looking to buy have been hurt. Businesses (and their shareholders) have gained more customers, grown their profits and had their pick of more staff.

Workers might have missed out on some wage rises, although they will have benefited from greater job security more than they realise.

However, there will be some who have missed out on jobs altogether in a more competitive market.

There are many economic and social issues to contemplate when considering migration policy settings, well above the full understanding of a humble investment analyst.

However, it appears to me the best way to benefit from rampant migration is to own houses and businesses, to have borrowings that will remain cheap to service due to lower inflation, and to avoid paid work.

Mark Lister is head of private wealth research at Craigs Investment Partners. This column is general in nature and should not be regarded as specific investment advice.