When it prepared the first LTFS in 2006, Treasury assumed net immigration of only around 10,000 a year. It’s averaged more than three times that.
A net 250,000 new immigrants arrived in the nine years of the Key-English Government, the majority in its last term, according to the LTFS.
Despite Covid, net immigration rose even higher under the Ardern-Hipkins Government to 270,000 in six years, including a net 108,000 in 2023.
The Luxon Government has already attracted an estimated net 84,000 new immigrants.
Cynics argue Governments do this to make headline GDP figures look less terrible than otherwise, hiding falls in GDP per capita, a better measure of living standards.
To her credit, Finance Minister Nicola Willis asks to be judged by GDP per capita, despite it having fallen nearly 4% under her watch.
Yet the fiscal calamity that lies ahead from 2030 now provides a different motivation for politicians to keep net immigration at record highs.
Treasury’s fiscal projections now depend on new immigrants – who at present arrive mainly from India, China and the Philippines – to pay the GST and income and company taxes necessary to stop the fiscal numbers reaching currency-crisis levels sooner than feared.
In te reo Māori, Treasury calls the LTFS He Tirohanga Mokopuna, which can be translated as “lookout for our grandchildren”.
But its population assumptions mean the future it projects is as much about children being born in India, China, the Philippines and increasingly Africa, as in New Zealand.
In 2006, Treasury projected a population of 4.7 million this year, based on the then-birthrate of two children per woman, just below the replacement rate assumed to lie somewhere approaching 2.1, plus the 10,000 net new immigrants each year.
Its projections had the population stabilising at five million from 2037.
With higher immigration than expected, Treasury has increased its population projections in each four-yearly LTFS, and the population is already 5.4 million.
Over the same time, the birthrate has fallen below 1.6, well under the replacement rate. It is not projected to rise above 1.6 this century.
The economic implications motivated Prime Minister Christopher Luxon’s joke that it would be helpful to him if New Zealand women started having more babies.
Hypothetically, under the lower birthrate, if immigrants perfectly matched those leaving, the population would peak at under 5.5 million in 2043 and then return to current levels by 2060.
Auckland’s traffic wouldn’t get too much worse than presently. We wouldn’t need so many new schools, hospitals and other infrastructure.
We might not need to spend billions on things such as another Auckland harbour crossing. The City Rail Link alone would probably deliver a fully functioning public transport system.
The problem is there would then be even fewer working-aged taxpayers than those necessary to minimise the debt bomb to “only” the numbers Treasury warns us about.
Treasury’s projections rely on another million new immigrants arriving over the next 25 years to push the population up to 6.7 million by 2050. Immigration must then stay high to get the population to 7.4 million by 2065, to keep debt down to “only” 200% of GDP.
It won’t be as easy as we might think to find a million new immigrants over the next 25 years who meet even our existing language rules, qualifications requirements and other criteria.
New Zealand’s falling birthrate is common to much of the world. Even India and China’s populations will soon peak. If recent birthrates continue, the Economist projects the global population will start falling in the 2050s. Any remaining growth will be largely limited to poorer African countries.
Roughly, the richer and more desirable a country, the sooner its population will start falling, and the greater pressure that will put on its ability to support its elderly, who will make up a higher percentage of its population.
Countries accustomed to generous pension schemes and welfare states in Europe, North America and Australasia – along with India, China, Japan, South Korea and Southeast Asia – will need to start offering incentives to keep their best and brightest young people at home while also competing fiercely for talented immigrants from poorer parts of Africa and elsewhere.
To people in our existing major immigration markets of India, China and the Philippines, New Zealand will need to make an even stronger case than other countries why coming here is better than trying to get into the US, Canada, Europe, Britain, Japan, South Korea, Singapore, Malaysia or Australia, or staying at home.
The same is true for successfully attracting the best and brightest from Africa and other regions where populations will still be growing. The likes of young Somalian doctors and Chadian entrepreneurs will be able to play the wealthier countries off against one another.
To meet Treasury’s assumption of another million new immigrants by 2050 and a further 660,000 over the following 15 years, New Zealand will need to find a way to compete in this game to prevent our already horrendous fiscal projections from becoming worse.
In the short term, we’ll also need to find the money to build the roads, subways, schools, hospitals, three-waters systems and other infrastructure necessary to accommodate the million new arrivals.
In this context, planners’ talk of needing capacity for two million new homes in Auckland starts to make some sense.
Continued mass immigration and the necessary new focus on Africa will, of course, profoundly change New Zealand. Assuming most new immigrants prefer to live in Auckland, we’ll need to start imagining what an Auckland of perhaps four million would look like and how it would work. It will need to be a city of apartment blocks and underground trains, including to the North Shore.
It will also be vastly more multicultural than it is today. Something close to a third of New Zealanders won’t have been born in the country.
In Auckland, it will be a clear majority. There will be changes – good and bad – on attitudes towards our traditional way of life and on constitutional questions, including the monarchy and the place of the Treaty of Waitangi.
But it would at least mean we’d have a shot at keeping our debt only at the disastrous levels Treasury currently projects.
Catch up on the debates that dominated the week by signing up to our Opinion newsletter – a weekly round-up of our best commentary.
