More data points this week suggest the New Zealand economy is becoming a slow-moving train wreck.
Wage inflation is officially at the highest level in 14 years — back to increases last seen just before the global financial crisis.
And it's growing — the quarterly figures are all moving upwards, so there is more steam in this trend. Meanwhile, hourly wage rates are up 6.4per cent over the past year, which would be great if we'd all become that much more productive — but unfortunately there is no evidence for that.
There are plenty of people, including the trade unions, who believe wages should be growing faster, given price inflation is now at 7.3per cent. It's an understandable argument, but unfortunately it doesn't work. Inflation adjustments to wages go straight back into cost increases, which drives price inflation up further. We keep chasing our tails and falling further behind. It's that thinking that leads to the classic wage-price inflationary spiral.
All the signs suggest we are beginning to enter just such a spiral. This in turn will give the Reserve Bank all the encouragement it needs to ratchet up interest rates still further to try to stop that happening.
Despite the best rhetorical attempts of the Prime Minister and Finance Minister to place all the blame for our inflationary situation at the feet of Vladimir Putin, our domestic economic policies are making things significantly worse for us. And front and centre right now are the country's immigration settings.
By accident or design, the government's "immigration re-set" is constraining our labour market to such a ridiculous degree it risks causing untold harm to the wider economy and society. Make no mistake — our ridiculously tight labour market is constraining growth and stoking inflation.
There is so much form-filling now required for an employer to bring a worker into the country that so far, one month into the new settings, only one solitary skilled worker has made it through the process and been issued a visa.
Which, let's face it, is nuts.
Things will, of course, speed up a bit, but if the settings remain unchanged there is no way the new system will meet the needs of our economy.
We've had any number of stories this week about employers' bad experiences dealing with the bureaucratic nightmare that Immigration New Zealand has become. Unlike the good old days, employers must fill in forms and gain formal accreditation from Immigration just to start the process.
Then they must advertise the role to be filled domestically for exactly the prescribed number of days and to the prescribed format Immigration prefers, including wage rates, maximum and minimum hours the person will work, and a sufficiently detailed description of the job to be performed. Then, once they get past the checkbox charlies on that step, they must submit the proposed employment contract to see if that meets with the officials' approval.
This is where the bureaucratic over-reach really begins.
Immigration officials are now pushing back on completely legal New Zealand employment contracts and seeking to have their preferred wording inserted instead.
Who in hell gave them the right to demand an employment relationship that New Zealand law doesn't even require?
Actually, don't answer. Probably the same people who demand those coming in from overseas in many cases be paid more to do a role than is the market rate in New Zealand.
So has all this tangled set of hoops employers and workers have to jump through been created by accident or design? Is it cock-up or conspiracy?
You'd be tempted first to think cock-up. After all, this is the crowd that has a fairly well-deserved reputation for poor execution. Only this week they revealed they are sending cost of living payments to dead people — apparently missing the significance of the word "living".
Sadly, it is the conspiracy theory that rings truer in this case. The current Government has set its mind against sensible levels of skilled migration which help New Zealand grow and become more prosperous for all of us. Its constituent parts, notably the unions, believe the isolationist "New Zealand for New Zealanders" rhetoric and that somehow they can constrain the labour market sufficiently to force real wages higher. That this form of market manipulation is just inflationary doesn't seem to have occurred to them.
It's true that labour shortages are everywhere in this post-Covid world. But governments all over the world are responding by putting out the welcome mat and making it easier, not harder, for skilled migrants to arrive. They are advertising offshore (witness the West Australian government ads currently airing on New Zealand radio) and offering visa discounts and fast tracks through their processes.
Why else would Anthony Albanese suddenly be interested in granting easier paths to citizenship for Kiwis who move to Australia? It's not out of a grand sense of altruism, or a response to our PM's persuasive rhetoric. They just need skilled migrants and we are a handy source of them, so they are making themselves more attractive for Kiwis to move there.
Our Government of course is doing the reverse. Charging employers more to hire migrants, charging immigrants more, putting roadblocks in the way, and doing everything except look welcoming to people who might move here and contribute to our society.
Given that we are starting to lose people as 20- and 30-somethings head offshore for delayed OEs and brighter prospects elsewhere, this is a highly self-defeating posture.
There is a real risk that other Western economies do the right things and get their economies growing again, and we stay stuck in inflation without growth, the dreaded stagflation.
The economic evidence that skilled migration boosts economies and societies is strong. Even the Government's hand-picked left-leaning Productivity Commission has told them skilled migration doesn't keep wages down, and in fact brings economic benefits.
But the Government is determined to keep advancing their pet theories, regardless of the economic pain they cause.
And this one is causing pain. When you go to the supermarket this weekend and wince, when you re-finance your mortgage and gulp, remember it is the Government's migration policy, along with a range of other fiscal and economic decisions, that is helping shrink your spending power.
Constricted labour markets in the current environment mean higher inflation and therefore, higher interest rates.
Gummed up borders are part of a long line of policies that risk making the country smaller, and New Zealanders poorer. Our Government is creating a more inward-looking, less prosperous New Zealand. And weirdly, by design.
- Steven Joyce is a former National Minister of Finance. He is director at Joyce Advisory.