'Considerable uncertainty' on immigration levels, Treasury warns in half-year update

Immigration levels have been forecast to drop drastically by 2022.

Labour's plans to cut certain visas has not altered the long-term forecast for net migration numbers - but Treasury has noted considerable uncertainty surrounding such estimates.

Net migration has remained high - adding 71,000 people to the population in the year ending September 2017.

In its half-year update today, Treasury said net migration is expected to fall steadily to the long-run median assumption of 15,000 in 2022.

Under this assumption, net migration falls by around 27,000 by the end of 2019.

The gradual declines in part represents an assumption of a continuation of the recent increase in the net loss of population to Australia as that country's economy strengthens.

The long-run net migration forecast is unchanged from the pre-election update.

That is despite Labour's pledge to "turn down the tap" on immigration, particularly by cutting certain student visas. Labour had estimated its changes would cut net migration by 20,000 to 30,000 a year.

"The composition of immigration may change, with fewer students and more work visas, including the proposed KiwiBuild visa," Treasury's half-year update states.

"This composition effect may have implications for labour productivity growth if the skill profile of migrants alters materially, although this has not been factored into these forecasts."

Treasury included the level and type of immigration when outlining risks to New Zealand's economic outlook.

"Migration inflows may not ease as expected if the relative attractiveness of living, working and studying in New Zealand is stronger than expected. In particular, changes in the Australian labour market are seen as a key driver of net migration cycles," the half-year update states.

"The composition of migration also has implications for the economy. For example, a larger inflow of construction workers may help to alleviate capacity constraints in the sector."

Treasury said it will review the long-term net migration assumption in Budget 2018 forecasts.