Out of workers: Critics urge Government to go back to the drawing board on immigration 'reset'

Standing in for Immigration Minister Kirs Faafoi, Stuart Nash delivers a speech on a reset of immigration settings which has left observers confused and employers worried. Photo / Mark Mitchell

It was billed as a reset of New Zealand's immigration policy, but a month on from a scene-setting speech, uncertainty reigns as employers describe the current skills shortage as a crisis.

On May 17, Stuart Nash, standing in for an ill Immigration Minister Kris Faafoi, delivered a speech in Parliament which was supposed to lay out the principles the Government would use in what it described as a "once-in-a-generation opportunity to change some of the shortcomings in the way we've been doing things".

Although the speech contained a series of broad statements about the direction of travel - high levels of temporary visa holders contributing to population growth, migrants still having an important role to play in New Zealand, too many low skilled people coming in, the speech contained nothing in terms of detail.

"A reset is not merely about numbers, it's also about ensuring we have the right incentives to support the growth path we want in our post-Covid recovery," Nash said.

"We are determined not to return to the pre-Covid status quo."

Afterwards Nash declined to answer questions on specifics, directing questions about details to Faafoi.

Some of those attending the speech were frustrated, warning that it simply created uncertainty as to whether industries most reliant on migrant workers would be able to access it, without providing details of what the new tests for importing labour might be.

"You had people come from Christchurch to hear a speech that had no detail, where people couldn't answer key questions and at the end of the day, there wasn't a clear signal what the direction of travel was. It was sort of a positioning piece, but that position wasn't that easy to determine," Brad Olsen, a senior economist at Infometrics said.

"The Government needs to go back to the drawing board on what their immigration settings are and if they want to socialise them, socialise them. Don't socialise a quick quip on the side, because that's really all we got."

A month on from the speech, the story of New Zealand's economy is a strange mix. This week, official figures showed the economy grew much faster than expected in the first three months of the year, defying predictions of a return to recession.

But at the same time cafe and restaurants are cutting hours and in hotels, receptionists are needing to be used to make beds despite the lack of international tourists.

Company owners are giving credible warnings that the lack of workers is constraining growth. BusinessNZ said this week that there were skill shortages in every sector it talked to.

During 2020 the labour market briefly slackened as workers fretted about their employment, but now employers are reporting that it is extremely difficult to find both skilled and unskilled workers.

The NZ Institute of Economic Research's Quarterly Survey of Business Opinion for March found employers were finding it more difficult to find staff than at any point in 2018, a year when the measure was at its tightest since 2005.

Amid claims that the skills shortage now represents a crisis, there is little word of how the reset is taking place.

This week BusinessNZ chief executive Kirk Hope said the Government was open to a conversation on how the new settings were formed.

But Faafoi's efforts to speak to the issues are unclear. This week, when Labour boasted that it was sending its largest ever contingent of MPs to Fieldays - arguably the largest event in New Zealand agriculture - Faafoi was a notable absence.

This despite the primary sector, along with tourism, being named checked as industries which rely heavily on migrant labour but will "look different" in the future.

Immigration Minister Kris Faafoi was a noteable absentee from Fieldays this week. Photo / Mark Mitchell

The Minister of Immigration was also unavailable for an interview all week, with his office saying he would only respond to written questions.

When the answers arrived, Faafoi's statement did little to fill in the gaps left in his speech or even assess whether he believes the current shortages in the labour market are severe.

Asked for his views on the state of skill shortages in New Zealand, whether they were more acute than before or in what area, Faafoi's office simply responded with a lengthy passage about New Zealand's strong economic performance.

"We know some sectors are still facing skill and labour shortages."

Did he accept that the skills shortage does damage to New Zealand's economic potential? Faafoi simply repeated the Government's line that its border measures in response to Covid-19 kept the economy running.

Asked how his thinking had evolved since the speech was delivered, Faafoi would only say further details would be released "later in the year".

He did not directly address whether the high level speech, with no actual detail, created uncertainty.

"Specific details will come, but the direction of travel is clear, and this gives sectors time to continue to adjust."

Faafoi said that "some sectors have done incredible work over the past year to think about ways to address labour shortages", by adjusting wages and conditions to suit local workers.

"By laying out our principles as part of rebalancing the immigration system, we have important signals to sectors to continue and accelerate this work."

He had no estimate about what "normal" migration might be when new policies are in place.

"A flow-on effect of this might be that there are fewer migrants overall, but this is not the main driver of the reset. This is about carefully turning the tap back on, but not in the way we have managed immigration flows before the border closure."

The speech has come under fire, even from figures who favour tighter immigration settings.

"There were no specifics, and there was no supporting analysis," Michael Reddell, a former special advisor to the Reserve Bank, wrote this week.

While Reddell gave the Government "a little credit" for asking the Productivity Commission to report on immigration settings,"strangely they seem to be proposing to make policy before the commission reports".

Act leader David Seymour said the Government was welcome to open a debate about immigration settings, but leaving almost all details out of the speech left everyone wondering.

"The Government left the whole business community guessing what the future of skills and labour is. If they are going to do a big reset, let's just see how insane that really is," Seymour said.

"No other economy in the world, or at least no free, open democratic economy tries to run a labour market of five million people."

The Epsom MP had seen examples of a wide variety of businesses needing to reduce operations because of shortages of skills and

"This is a major problem and this government has given a half-arsed press conference and now, there might be a reset, or maybe there won't. People need certainty as the world comes out of Covid."

A refusal to address the skills shortage would likely do damage to the incomes of New Zealanders.

"It will permanently reduce New Zealand's growth and productivity because businesses need to bring in specific skills so they can remain globally competitive and, ironically, employ more New Zealanders," Seymour said.

While over time the economy might adjust to create the skills needed in the economy over a decade or so, many businesses depended on finding skills now to survive.

BusinessNZ's Hope said the Government was pushing for businesses to prove they were seeking to train local staff as well as have relationships with local education providers or MSD offices.

"Many industries are already doing that, but there's still significant shortages now and there'll be some medium term challenges."

"Every sector we talk to cannot access the labour they need. There are large scale vacancies across a range of industries. It's a challenging set of circumstances so the reset might be different to what they were thinking about."

OUT OF WORKERS: A Business Herald Series