If you want evidence that Winston Peters is not running this Government, New Zealand's migration rate is your smoking gun.

A year and a half on from an election campaign in which immigration was blamed for soaring house prices, crowded roads and inflating National's economic success, the annual net migration number is back near record levels.

The Coalition Government, under pressure from business to address serious labour shortages, has backed away from plans for a dramatic reduction.

It is still promising change, but not quickly and not necessarily in the actual number of arrivals.

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"There is no Government target for net migration," says Immigration Minister Iain Lees-Galloway.

"We're not fixated on the number. What we're interested in is having an immigration system that supports the economic transition to an economy that is more inclusive and more productive."

Both Labour and NZ First campaigned on reducing net migration. NZ First wanted it slashed by more than 80 per cent.

Labour, under Andrew Little's leadership, talked about reducing the number by as much as 40 per cent.

When Jacinda Ardern took the Labour leadership she said the party's policy didn't change but shied away from hard numbers – calling the earlier figures estimates, not targets.

And just as well, because net migration is now running at 61,600 people a year – not far off the 64,000 peak it hit under John Key in 2016.

For Lees-Galloway, the difference between this Government's policy and the last is about the quality, not the quantity of immigrants.

"What all the parties [in the Coalition] have been concerned about is that the way the immigration system was run by the previous Government was to generate economic growth though population growth and housing price growth," he says.

"What we're interested in is a high-quality immigration system that is better planned, is more proactive and supports our goals for the transformation."

But he concedes the Government is taking time to make changes and is moving cautiously.

Immigration Minister Iain Lees-Galloway. Photo / File
Immigration Minister Iain Lees-Galloway. Photo / File

"The fact is, the changes in the immigration system do take a while to flow through so what we are still seeing are the results of the previous Government's policies," he says of the current elevated levels.

"At the moment the immigration system is reactive and we can't just change the settings overnight; we have to work alongside businesses and do this in a systematic fashion.

Economist Satish Ranchhod believes the Government is making some sensible policy moves, but says the total number of migrants is still important.

A new methodology at Stats NZ – which will ultimately be much more accurate - has cast some doubt on the provisional figures of the past few months.

But regardless: "we're growing at a rate that is really rapid for any developed economy", says the Westpac senior economist.

"If they are not talking about a target then there is the potential we will continue to see strong population growth.

"Those strong inflows in recent years have given a powerful boost to demand," Ranchhod says.

But the number of arrivals has also put pressure on housing stock and on infrastructure, he says.

Policy plans and population assumptions continue to assume that New Zealand's net migration will fall back into negative territory – more people leaving than arriving. That's what has happened regularly since records began.

But underestimating immigration rates is risky, Ranchhod says.

"We've seen immigration and population growth continually surprising to the upside. That means that those investment levels in infrastructure have been lower than expected," he says.

"We focus on inflows but large numbers of New Zealanders aren't leaving and that's still adding pressure. We think that is going to be a pretty important driver of the economic cycle for the next three to five years."

Historic boom

Sociologist Paul Spoonley says this current migration cycle is historically unprecedented, "perhaps the most significant inward flow of permanent and temporary migrants we've had".

The previous cycle – from 2006 to 2013 - saw a net gain of about 35,000 people, he says.

"From 2013 to 2018 we made a net gain of 270,000, by far the highest we've ever had," says the Massey University professor.

On a per capita basis, population growth in the period peaked at 2.1 per cent in 2017 - running ahead of the UK, US, Canada and Australia.

At that rate our growth was more in line with the likes of sub-Saharan African nations such as Sierra Leone (2.2 per cent).

In sheer numbers, more people are arriving annually than in the great colonial migration of the 19th century.

The past couple of months aside, Spoonley believes net migration gains will slow. But right now we're still in the boom.

Policy moves

Since taking office, the Government has adjusted visa settings to support the construction sector.

It has increased the recognised seasonal employer cap by 1750 to 12,850 in order to alleviate labour shortages.

It has made changes to post-study work rights for international students – effectively tightening them.

And it has increased the Refugee Quota Programme from 1000 places a year to 1500 places a year from July 2020.

In other words it has relaxed some areas, tightened in others, but not made any wholesale changes.

Otara market. Auckland has one of the biggest migrant populations in the country. Photo / File
Otara market. Auckland has one of the biggest migrant populations in the country. Photo / File

There is a lot more underway, says Lees-Galloway.

The Government is working on some more substantive changes for employer-assisted work visas and regional workforce planning.

"They've adopted a much more regulatory approach to migration," says Spoonley.

"They are trying to align demand with immigration labour supply but they've also heard a very strong message from regions and industry that migration is critical to what they are doing and any cut is going to be quite devastating for some industries."

Skill shortages

There's no doubt business groups remain nervous about policy changes. But they are also pleased the minister has been talking to them. There is relief that the pace of change has been slower than they expected.

"To be fair, I think the Government has recognised the issue," says Alan McDonald, Employers and Manufacturers Association (EMA) general manager of advocacy.

"They recognised the scale of the problem ... whether or not Winston's in that camp I don't know, but they've listened to employers."

But the problems caused by skill shortages aren't getting better, says McDonald - they are getting worse.

EMA surveys show that within four years the proportion of employers going to the immigration pool to fill skills gaps has doubled, from 27 to 53 per cent.

Skills shortages now rate as one of the biggest concerns facing employers.

Pickers wanted, harvest time in Hawke's Bay. NZME/File Pic
Pickers wanted, harvest time in Hawke's Bay. NZME/File Pic

With unemployment down around 4 per cent, McDonald says that leaves a very small pool of reliable workers to draw on.

The EMA is concerned that additional regulation and accreditation required for the Government's "alignment" of immigrants with skills shortages will further slow opportunities for growth.

"The Minister has said the same thing to us: we're not focused on the number, we're focused on the quality," McDonald says. "I get it, that's fine, but there's a risk of choking off the flow, which could happen if everybody has to be registered."

He says employers are already frustrated by bureaucracy which requires anyone trying to bring in five or more foreign workers to get accreditation.

"It's taking up to two months or longer for that accreditation to go through. By the time you have to advertise and prove your case, it's taking up to five months before you can get someone," he says.

"They are proposing everyone will have to be accredited. So if you only want one employee you're going to have to get accreditation.

"If they go there, you've got to have the resources – within MBIE and the Immigration Department - to cope with the sudden influx of people needing to register."

It is a balancing act, says Lees-Galloway.

"It needs to be a transition. We need to put the right incentives in place to get the changes we're looking for.

"We need to keep the pace up at our end. We've completed the consultation on that temporary visa work and you can anticipate the first fruits of that coming out in the middle of the year and work ongoing through the year."

Lees-Galloway says the planned "gateway framework" puts the employer at the front end of the process.

It is designed to put the onus on good employers to ensure options for New Zealand workers are fully explored - and that includes training.

But McDonald sees that as "using a sledgehammer to crack a walnut".

"We'd acknowledge that there are a few employers who get it wrong and consistently go to the immigration pool but does that mean we have to register 100 per cent of all employers?

"Or do we just have to be a bit more careful about how we protect and police that area? It's just a blunt instrument to fix what is – okay, a high-profile problem – but a small one."

Populist backlash

By internationals standards, immigration is only intermittently a high-profile issue in New Zealand.

In the US, the UK and to some extent Australia, migrant numbers have been used as a political weapon, propelling populist politicians to power.

British MEP and Brexit champion Nigel Farage has led a populist backlash playing on immigration fears, AP Photo
British MEP and Brexit champion Nigel Farage has led a populist backlash playing on immigration fears, AP Photo

New Zealand has done comparatively well to absorb the number of immigrants it has without a populist backlash, says Spoonley.

It helps that this country doesn't have accessible borders, which offer politicians the chance to play on fears of being swamped by illegal immigrants.

"When we do the trend analysis on attitudes to Asian migration, what is interesting there is the approval rates. The numbers agreeing that Asian migration is good for NZ are very high by international standards," says Spoonley.

"The rate of approval in NZ is likely to be two to three times higher than we get in Europe.

"What you tend to get is spikes in public concern. So 1993-96 there was a spike and New Zealand First was a beneficiary."

More recently we've seen issues such as Auckland property prices and the Crafar farms sale. "There are distinct issues that trigger highly negative responses," says Spoonley.

"What equalises that is the positive economic story and a relatively strong understanding of the role migration plays in that.

"We came through the GFC quite well and have done relatively well since ... and what is important in that is the contribution that migration makes."

The fact that the most recent trigger for public panic - Auckland's soaring house prices - have abated may also be cooling concerns.

House prices in Auckland have been going sideways for the past two years. That has been driven by regulation of overseas buyers, new rules for investors, LVR restrictions on borrowing, then the threat of a capital gains tax, Ranchhod says.

"Now we have the spectre of CGT off the table, we still have very low interest rates – maybe going lower - and we've still got strong migration. There is a risk that we see the housing market re-accelerate in Auckland.

"Auckland is still going to need about 100,000 homes over the coming decade, that's assuming a slowdown in population growth. So it's still a tight housing market."

Where to next

One thing is for sure: if New Zealand wants to maintain a growing population it needs positive net migration.

"Over the 20th century, net migration played second fiddle to natural population growth (births vs deaths)," says Statistics NZ's chief demographer Kim Dunstan. "But so far this century net migration is playing a more important role.

"Because of our ageing population, that natural increase is likely to shrink which means, like a lot of other countries, migration will play an increasingly important role."

Japan is at the leading edge of this trend, with about 26 per cent of its people now 65 and older, he says. In New Zealand, 15 per cent of people are 65-plus.

"By the time we get to 25 per cent they [Japan] will be over 40 per cent, which is quite staggering."

There are other places such as Korea, China and western Europe where the natural rates of fertility are much lower than New Zealand's.

NZ First leader and Deputy Prime Minister Winston Peters. Photo / File
NZ First leader and Deputy Prime Minister Winston Peters. Photo / File

"In some ways they're a harbinger of where we'll be in future decades," he says.

Lees-Galloway agrees. When he talks about the big picture, he sounds the very opposite of an anti-immigration populist.

He acknowledges that Labour and New Zealand First "do come at these things from different perspectives".

"If you have a look at the Deputy Prime Minister's comments on the day the Coalition agreement was announced, he said that not every single NZ First policy is articulated in the coalition agreement."

New Zealanders value immigration, says Lees-Galloway. "We know that. New Zealanders recognise our status as country built on immigration and the overwhelming majority of New Zealanders appreciate the increasing diversity.

"What they also expect of their Government is that we will make the investment necessary to support population growth. They expect us to make sure we're providing the houses and schools, the hospitals and transport infrastructure that people need so everyone can live well.

"The debate in New Zealand has been a mature one. And I anticipate that will continue."

The new numbers

Statistics NZ's chief demographer Kim Dunstan is the man in charge of gathering New Zealand's migration and population data.

He's overseen a new methodological approach which has shifted the goalposts on New Zealand's top line migration figures.

Previously, we'd been basing the numbers on the intentions that long-term arrivals wrote down on those annoying little cards we hand in at the airport.

But that "intentions-based" method failed to account for the people who changed their minds and left earlier than they said, or stayed longer.

Now we have the technology to measure those additional movements - the "outcomes-based" approach - and the net result is that there are fewer people sticking around than we thought.

We don't have to fill out the cards anymore.

Auckland International Airport. New technology makes matching arrivals and departures more accurate. NZH file pic
Auckland International Airport. New technology makes matching arrivals and departures more accurate. NZH file pic

"There's no doubt, whether you are looking at the intentions-based or outcomes-based measures, our net migration is very high by historic standards," says Dunstan.

The outcomes-based measure was introduced in September last year. Where the peak had been recorded at 72,000 in mid-2017 (right at the height of the election campaign) the new data says the record was just 64,000 set in mid-2016.

"The change has been from having very precise but not necessarily the most accurate numbers (with the intentions-based measure) to having something that has uncertainty, at least initially, but which is a more accurate measure because it's based on actual outcomes."

Dunstan says the nature of the changes will take some time to bed down.

Given the time it takes to be sure someone really has stayed long term, it is generally considered that it takes 12-16 months before you can be 100 per cent sure of the data.

But in order to maintain a timely flow of data, Stats NZ is modelling the results and Dunstan believes that after four months the results are pretty reliable.

"By five months the overwhelming majority of arrivals can be sorted into long and short term and the numbers become stable."