All immigration adds to the size of the economy

"Gra-gra," she said as soon as they came off the plane and she saw us. Grandad glowed. When she was here last Christmas she was still a baby. Now she walks, runs, gives big hugs and begins to talk like a little angel. Hopefully, she is here for good.

Her parents are brave coming home to look for jobs in this economy and buy a house at Auckland's prices. But they are young and equipped to do well somewhere. They have lived in the United States and Europe but this is where they want to be.

We're given the impression the young are deserting this country in droves, discouraged by the cost of housing and attracted by the higher salaries not too far away in Australia. My son was in Australia and came back a couple of years ago. His work in computers defies my understanding but he has been able to buy a house in Auckland recently.

If this is beginning to sound self-satisfied, I am not. I'm feeling a little guilty about the economy my generation has made for theirs. I was their age, early 30s, in 1984 when baby boom governments began to strip away the protections previous generations had established and exposed nearly every sector to free markets.


The theory made perfect sense to me and still does. But it hasn't worked out as we were led to expect. Market signals have not led much investment into products of higher value. Our meat goes to McDonald's, we are still exporting logs.

Fonterra, our only global success, is still essentially a farmer co-operative despite a recent concession to capital markets, and it has found our niche to be in dairy commodities rather than fine chocolate and cheese.

Property is still the only investment most of us trust.

Yet thanks to 20 years of good government we have a dollar that holds it value. We have costs under control, budgets within balance and public debt so low that we are going to come through this global slump fairly well.

But when? Four years of little or no growth in the world is a long time for business to hunker down in a remote country with so few people.

Last month the NZ Institute of Economic Research suggested 15 million would be needed for a domestic market that could support the formation of indigenous companies of the scale needed for new exports.

Since we have grown from 2.5 million to just 4.4 million in the past 50 years, adding another 10 million in the next 50 years would take some effort.

It might not be popular but that is not necessarily an impediment. Economic reforms were not put to a vote until they were under way. Nor was that other great achievement of that time, the revival of the Treaty, and the same may be said of the decision to admit more diverse immigration.

Good government requires a tacit bipartisan understanding that some things are too important for the political contest. The public are not fooled, we accept the need.

To reach 15 million would require a net increase of 200,000 people every year. I am not sure we can attract that many but there has never been a better time to try. Unemployment in the United States and Europe is turning them against immigration.

When the Economist recently criticised new British restrictions, it warned that educated, resourceful migrants would go instead to Canada and Australia. It didn't mention New Zealand.

We might be the second or third choice for those seeking an English-speaking country, but all immigration adds to the size of the economy.

We lost 88,000 people last year, slightly more than we gained. The more we admit, the fewer we might lose as the economy grows. A 200,000 annual target becomes conceivable.

Heaven knows, we have plenty of room. The big lonely landscapes we value for tourism and recreation are mostly regions where not much of the increase would settle.

The world is rapidly urbanising and New Zealand is no exception. Auckland already has a third of the country's population and the proportion is going to grow.

The city is already packing more people in. When I look around my suburban neighbourhood, the lawns and vegetable gardens of a generation ago are practically all gone. In their place is another house.

There is enough bush left in the suburb that you hardly notice the residential density of the area.

Verdant, subtropical Auckland, Northland and Bay of Plenty could be a thriving metropolitan economy, big enough to support everyone who wants their child to grow up here.

When I see our little Christmas angel under bright sun in a blue sky, it has to be possible.