But Luxon questions if levels are sustainable
The inflow of migrants to New Zealand has reached a record high.
With the influx of immigrants, the net immigration rose to more than 128,900 in the year ended October, according to Statistics New Zealand. This increase involved the arrival of around 173,400 non-New Zealand citizens while citizen departures were only 44,500.
However, Prime Minister Christopher Luxon said that the immigration level reaching 118,000 in September did not feel sustainable and expected to see it begin to decline.
Inflation concerns
A BNN Bloomberg article said that the Reserve Bank of New Zealand (RBNZ)’s initial relief when it comes to foreign workers easing the pressures on the labour market as well as wage inflation has now turned to concern regarding a new wave of demand since inflation continues to be sticky.
Last month, the RBNZ had signalled a greater risk of a hike in rates next year as the flood of new arrivals to the country has pushed up rents and house prices.
Christian Hawkesby, the deputy governor, told Bloomberg earlier this month that the central bank can no longer ignore the surge in immigration even if it was expected to subside by 2024. This was because the inflation rate has been sitting above the 1-3% target for a long time, currently at 5.6%. The Reserve Bank forecasted that the gauge will be returning to the top of the band by Q3 2024.
Finding a balance with immigration
Net arrivals in October were at around 9,300 which was the lowest since December. The article said that this number further added to the belief that the increase in immigration will be losing steam.
Luxon further stated that the government has yet to set a target but intended to find a balance so that the shortages in skilled workers will be filled without heavily impacting the country’s housing and other infrastructure.
“We expect the RBNZ to remain wary of a net migration boost to housing and economy-wide inflationary pressures,” said Mark Smith, senior economist at ASB Bank in Auckland.
“With core inflation only slowly declining, restrictive OCR settings will be needed for a while yet. We do not expect cuts until 2025,” he said further.
