The Minister of Immigration has today announced some changes in New Zealand’s immigration policy.
The centerpiece of New Zealand’s immigration policy has, for many years, under both National and Labour-led governments, been a target (“planning range” they like to call it) for the number of non-citizen residence approvals of 45000 to 50000 per annum. For all the talk about the volatility in the net permanent and long-term migration numbers, much of that volatility simply results from choices of New Zealanders to go, or not. That has little or nothing to do with immigration policy. In terms of overall numbers, residence policy itself has been pretty stable. Some years, actual approvals undershoot a bit, and sometimes they overshoot, but the target itself hasn’t changed for a long time. Of course, New Zealand’s population has grown quite rapidly, so approvals as a share of the population have been trending down, while remaining high by international standards.
In today’s announcement, for the first time in a long time, the target has been cut. The cut itself is small – for the next two years, the annual target will be 42500 to 47500 non-citizen residence approvals. In other words, the target has been cut by 5.5 per cent.
That is a small step in the right direction. I’ve argued for some time that the residence approvals target should be lowered to something more like 10000 to 15000 per annum, and that to do so would, over time, offer a path towards a material improvement in New Zealand’s dismal long-term productivity and relative income performance. Now that the hitherto sacrosanct (although, as everyone accepts, initially rather arbitrary) 45000 to 50000 target has been cut, even if only modestly, I’d hope to see further reductions in the residence approvals target in years to come.
Perhaps as encouraging is the other change. A large chunk of residence approvals have been going to people, often older parents, who would not qualify for New Zealand residence on their own merits, but get in simply because they have family already here. Since our immigration programme is explicitly focused on the potential economic benefits to New Zealand, and New Zealanders, this large share of approvals going to relatives undermined the (already slim) prospects that the immigration programme was ever going to benefit New Zealanders as a whole.
In today’s announcement, the government is
reducing the number of places for the capped family categories to 2,000 per year (down from 5,500)
In other words, all (and more) of the reduction in the targeted number of residence approvals will come from that group of migrants who never qualified to get here on their own merits. If anything, there is a slight increase expected in the number of people who will gain residence based on their own skills etc. All else equal, that is a step forward – economically and fiscally.
As part of today’s announcement, the number of points required for residency has been increased. That is really only a logical corollary of the likely increase in the number of applicants under the skilled migrant stream (as a result of the influx of foreign students in the last few years), but should mean that the people we do grant residence approvals to in the next couple of years will generally be of higher “quality” (in terms of the sort of characteristics the programme rewards) than those in the last few years.
Today’s announcement is a small step in the right direction, and thus welcome. It helps illustrate what a useful and flexible tool the residence approvals target is. Contrary to many naysayers, it is relatively straightforward to alter our residence approvals numbers. Annual approvals will fluctuate, as will flows of New Zealanders, and flows of people on temporary visas, but, over time, it is the residence approvals programme target that largely determines the contribution of immigration policy to New Zealand’s population growth. As a natural resource dependent country, in a very poor location from which to base other sorts of internationally-oriented businesses, we don’t need more people, which is why – ideally – today’s announcement will be the first of many over the coming decade.
As a reminder, the United States issues around 1 million green card a years: that is one green card per annum for each 319 people already in the United States.
Our new target, centred on 45000 residence approvals per annum, offers one new residence approval per annum per 105 people already in New Zealand.
The evidence base for running an immigration programme three times the size of that of the United States, to an extremely remote location with an underperforming economy, remains scant to non-existent, even after decades of the current policy. A challenge for MBIE, and Treasury, and their respective Ministers, might be to show compellingly that New Zealanders as a whole are benefiting from the high immigration policy – a policy that, slightly attenuated today, continues.
I’ve long argued that lowering the residence approvals target materially would, over time, lower the real exchange rate, and assist in shifting the economy towards a more international orientation (more exports, more imports, and less reliance on the non-tradables sector). Media accounts suggest that the NZD actually fell on today’s announcement. If so, that is welcome – and consistent with the fact that asset markets tend to be forward-looking. But, as everyone knows, exchange rates are volatile, and in the grand scheme of things, it is unlikely that a 5 per cent in the residence approvals numbers in isolation will make much discernible difference in the medium-term. Now a 50 per cent fall, well….that really should make a difference.