Immigration surge strongest in six years

Economists say increases in migration spur more consumer spending and the demand for housing, as well as boosting the potential workforce. Photo / Greg Bowker

The upsurge in net immigration gathered pace last month, with the largest net inflow since July 2003.

The net gain of 2700, seasonally adjusted, pushed the annual increase to 11,200, which is in line with the average increase of 11,400 since 1990.

But that masks the rate at which the net inflow of migrants is accelerating. The net gain of the past three months was 6600, up from 2800 over the preceding three months and a net outflow of 200 in three months before that.

It largely reflects fewer New Zealanders leaving for Australia and Britain, down 1500 (38 per cent) and 500 (36 per cent) respectively on May last year.

On the incoming side a 200 (10 per cent) increase in returning expatriates offset a decline of 300 (6 per cent) in the number of immigrants.

Economists see the pick-up in net migration as underpinning consumer spending and the demand for housing. It also expands the potential workforce but they see the boost to the demand side of the economy as faster acting than the boost to the supply side.

"Net migration was one of the key drivers behind the 2003 to 2007 economic upswing and was particularly important for the construction sector," said Goldman Sachs JB Were economist Bernard Doyle.

"The longer net migration persists around these levels the more optimistic we become on the prospects for the domestic economy."

UBS economist Robin Clements said the migration gain was positive for housing demand, reinforcing the improvement in affordability from lower mortgage rates and house prices.

ASB economist Jane Turner said Australia's unemployment rate had been rising at a similar pace to New Zealand's and with a more challenging labour market, New Zealanders were playing it safe and staying put.

"Departures to the UK have also slowed considerably, suggesting the number of young Kiwis heading on their OE [has dropped markedly]."

A Treasury research paper in April illustrated the importance of immigration to the labour supply by pointing out that some 23 per cent of the population was born overseas.

At the same time 11 per cent of New Zealand-born people live in Australia.

Between 2005 and 2007 12 per cent of migrants came to study.

Many stay on; 9 per cent of permanent migrants (those here for at least a year) move on to resident status directly from a student visa.