Slashing immigration really is quite easy

Michael Reddell Housing, Immigration, labour party

There is a story on the excellent new Newsroom site this morning on immigration.  When I printed it out at about 8am, it was running under the headline “Slashing net migration not easy”, although forty minutes later that had been revised to “Few answers to slashing net migration”.  [UPDATE: by 4:15pm the story is now running as “Slashing migration offers no easy answers”.]    Perhaps reflecting the preferences and presuppositions of the author, the URL for the story reads “immigration to rear its ugly head”, as if somehow there is something wrong with a serious discussion, in election year, about the number, and type, of people we allow to settle (or work) here.    But whether we should or not, if we (New Zealanders collectively) decided to cut back migrant numbers it is really quite easy to do so.  I’ll come back to that.

We are still waiting to see where Labour is going to land on immigration.   The other day housing spokesperson and campaign chair Phil Twyford was talking about what Labour might do on immigration.

Labour’s election chairperson Phil Twyford said Auckland was creaking under the weight of too many people and not enough investment in infrastructure.

and

Mr Twyford said details were still being worked out, but Labour policy would be to find a better balance.

“There is room to ease back particularly in the area of temporary work visas, and the blowout that has occurred in the so-called skilled migrant category.

“We think there’s flexibility there to ease back on the overall levels of immigration and that will take some of the pressure off Auckland.”

And yesterday Andrew Little was also commenting

Little said National had failed to manage immigration, especially by bringing in labourers when there were unemployed labourers here, and by the number of work visas issued.

But he said Labour would manage immigration, not cap it.

Bad as they are, stresses on Auckland –  housing or infrastructure –  aren’t the most compelling economic argument for cutting migrant numbers.  But if Labour is serious about making a difference there, it can’t just involve tweaks at the margin, or things that will affect numbers for just a year or two (since land markets, for example, will trade on expectations of future demand and supply pressures).  I guess we’ll see some details eventually.

What makes me sceptical that Labour’s talk in this area will amount to much is another comment from Andrew Little in the same article.

But asked if he welcomed signs Auckland house prices were falling, Little said no.

I’m sure there all sorts of political considerations about not scaring the (relatively small minority) of people who have taken on very large mortgages in the last few years, but really…….    When house prices in Auckland are ten times income a key marker of whether things are coming right will be a fall in house prices.   If all Little is saying is that prices will ebb and flow a bit, and that nothing structural has yet happened to reverse the inexorable trend rise in price to income ratios, then I agree with him.  But when houses are less affordable than they’ve ever been, we need politicians with the guts to say that they want to see house prices, especially in Auckland, a lot lower.

[UPDATE: In another report of the same interview Little confirms his reluctance to see prices fall    “Having the right number of houses, or closer to it, stabilises prices, it doesn’t collapse prices.”    That stance would be fine, if prices hadn’t got so out of whack over the last few decades. ]

It isn’t as if time will quickly take care of the problem if nominal house prices simply hold at current levels.  We have an inflation target centred on 2 per cent, so over time we can assume incomes will rise by around 2 per cent plus whatever growth in labour productivity the economy can manage.  For the last five years, that has been zero.     Here is what happens to price to income ratios, starting from 10 (around the current Auckland level) on three different productivity scenarios.

price to income scenarios

Depending on how optimistic you are, it could take 40 to 50 years to get house price to income ratios back to around three – the sort of level sustained over long periods in well-functioning US cities (and in many other places before land use regulation became the fashion). Perhaps you are sceptical New Zealand could get back to three. It would take 20 years or more just to get back to five.  That sort of adjustment makes the government’s NZS eligibility reform proposals look positively fast-paced.

But to revert to immigration –  which has the potential to play an important role in accelerating any adjustment that looser land use regulation, and perhaps even new government house building, might set in place –  Newsroom’s Shane Cowlishaw reckons there are few easy ways to cut immigration.    It is mostly quite a good article, made more difficult for the author by the refusal of either the Minister of Immigration or Winston Peters to be interviewed, and the fact that neither Labour nor New Zealand First have published any details of their policy in this area.

But, frankly, I think Cowlishaw’s conclusion is simply wrong.  It isn’t that hard at all, and actually the current government showed that with the baby steps they took last year (cutting the residence approvals target, and –  within that – suspending parent visas, and reducing the family category numbers).

I outlined what I’d do in a post a few weeks ago.   Here it is again, all focused on the bits of the net flow that are about immigration policy, the number of non-citizens we let in to live and work in New Zealand.

  1.  Reducing the residence approvals target from around the current 45000 per annum to, say, 10000 to 15000 per annum.  In per capita terms, that would be about the rate of legal immigration the US has, and would be similar to the rate we had in the 1980s.  Not exactly closing the door, but certainly pulling it over to some extent.
  2. Within that reduced target I would look to focus much more strongly on demonstrably highly skilled people (who offer the best chance of fiscal and productivity gains) and thus would
    • revisit, reduce and potentially eliminate the current Pacific access categories,
    • permanently eliminate parent visas, except (and even then capped) where there is an enforceable, insured, commitment to full financial support from the parent, or their New Zealand citizen child.
    • leave the refugee quota as it is
    • eliminate the additional points provided for job offers in regional areas (a measure that is tending to lower the average quality of the accepted migrants)
    • eliminate additional points for New Zealand specific qualifications,
    • eliminate additional points for jobs in areas of “future growth” or “absolute skill shortage”
    • more strongly differentiate points in favour of higher level qualifications,
    • perhaps establish a category akin to the US visa for those with extraordinary ability
  3. Eliminate the provision allowing foreign students studying here to work 20 hours a week.  If New Zealand tertiary institutions really have a product worth buying –  and some probably do –  they should stand on their own feet, as other exporters are required to.
  4. Reshape the work visa system with a view to (a) reduce the scope for lobbying and influence peddling, (b) reducing the total number of people here on work visas at any one time, and (c) provide much greater flexibility for employers to utilise work visa people for short specific periods in highly-skilled and well-remunerated roles.    Since there would be many fewer residence approvals places open (see above) this path would in any case be much less popular with prospective migrants.   Specific features might include:
    • no one could have a work visa for more than two three year stints
    • use an age-based matrix in which in normal circumstances no work visas might be issued to anyone under 30 for a role paying less than, say, (an inflation-indexed) $75000 per annum, increasing by (say) $25000 in each five year age window up to a cap so that for a person over 50 to get a work visas they would need to be in a role paying $200000 per annum or more.
    • no doubt there would need to be some exceptions to this, and it would not apply to say approvals for roles of less than perhaps three months, but the point is to get the focus not on official judgements of “skill shortages” but on attracting people, if we do, who are capable of commanding high salaries (loose proxy for skill) on market.

I’d also be rethinking (although this isn’t specific) the emphasis in the current points scheme on people who already have New Zealand work experience.  It was a well-intentioned reform –  a reaction against the experience in the 1990s of people coming in who for various reasons simply couldn’t get established in the New Zealand labour market using the sorts of skills/qualifications that got them entry in the first place.    But it has the effect of giving priority to relatively lowly-skilled people who managed to get in on temporary work or student visas, over people with much higher skills and much more potential to add value to New Zealanders over the long haul.

Little or none of these sorts of changes requires complex legislation. For better or worse, the details are mostly at the whim of the Minister or Cabinet.  They would make a substantial difference, and offer the prospect of a sustained reduction in the net inflow of non-citizens (although still lots of year to year variability in the PLT numbers, that include New Zealanders).   They would, among other things:

  • take immediate pressure off the housing market (current and expected future pressures),
  • lead to material downward revision in expected interest rates (possibly actual cuts, but at least pricing out any increases for a long time to come),
  • lead to a material fall in the nominal real and exchange rates, boosting the competitiveness of our struggling tradables sector,
  • force our export education industry to rely on the excellence of its product (or at least some mix of excellence and moderate cost) rather than what I’ve described as “export subsidies” from the immigration system.  Subsidies typically don’t build strong robust, sustainably internationally competitive, industries.  Rarely if ever have, rarely if ever will.
  • we’d strengthen regional economies relative to Auckland (an economy whose productivity growth has been underperforming even relative to that of the whole country),
  • get the government out of the business of picking winners in the labour market, or sectors/skills that somehow need a government hand on the scales to help them out, and,
  • over time, it would be likely to ease pressures holding down the wages of New Zealanders towards the lower end of the skill distribution.

Of course, the immediate response from much of the business sector is “but how will I get workers”.    It is a real and genuine issue for individual firms under current policy settings.   But individual firms simply don’t see the economy as a whole, or the adjustments that would take place across the whole economy if a policy package like the one I’ve outlined above was adopted.

Thus, individual firms treat migrant labour as increased labour supply.  And, for each of them, of course it is.  But migrants add demand as well as supply –  reasonable estimates (and the consistent historical view of New Zealand macroeconomists are that in the short-term the demand effects are stronger than the supply effects.  After all, immigrants have to live somewhere, shop somewhere, work in some building, and few bring their household appliances (etc) with them.  So an individual migrant might indeed ease an individual employer’s labour availability issues –  and if there are lots of migrants in a specific sector, they might even ease those constraints for the sector –  but for the economy as a whole:

  • in the short-term high inward migration exacerbates overall labour shortages in the economy, and
  • in the longer-term, high migration makes little or no difference to overall labour shortages (or, eg, to the unemployment rate).

That is true even if all the typical economist pro-immigration arguments, including those about potential productivity spillovers, hold  (which, of course, I don’t think they have in modern New Zealand).

So what would happen if a government were to announce a package like the one I’ve outlined above?  I’ve already sketched it out at a high level above.  But here is a bit more colour and flavour.

Whole sectors of the New Zealand economy employ many more people than otherwise because our population is growing so rapidly.   Activity in those sector would shrink, perhaps quite materially.   With a population growth rate around zero –  similar to those of many prosperous European countries –  not many people would be required to build new houses and road, and fewer people (for example) would be selling the stuff the stocks new houses (carpets, appliances etc).  Those people would need jobs elsewhere.  The prospect of lower interest rates would make more private investment attractive, but on its own that channel would take a while to work –  after all, overall domestic demand growth would weaken.  But the lower exchange rate –  actual and prospective –  would make a big difference to the competitiveness, and willingness to invest, of the tradables sector.   That investment will usually require workers –  to build it, and to staff it. So resources will shift within the economy.   Dairy farmers who couldn’t get Filipino workers could afford to bid up wages to some extent to attract potential New Zealand workers  (it doesn’t happen overnight, but markets work –  it will happen).  It would certainly be tough for (consumers of ) some domestically-oriented industries that have been heavily reliant on migrant labour (one could think of rest homes) but the whole point of an economic strategy that successfully reorients the economy towards a much more strongly-performing tradables sector is that tradables firms have it better relative to non-tradables firms.  (And non-tradables sector firms typically have pricing power that tradables sector firms don’t.)  It has been the other way round for too long, and we’ve seen the results (in eg, the charts I showed the other day).

Are there losers, even among New Zealanders, from such an approach?  Well, yes, of course.   It is almost impossible to re-orient the economy without there being losers.  Some of the people who will be worse off will be those holding urban land in or around our major cities (especially those who might otherwise have been thinking of selling).  Non-tradables firms often won’t find it attractive –  a business model geared to rapid population growth isn’t going to look so good under a model that no longer seeks to drive up population.  And there would inevitably be some workers in some firms/sectors who might find the adjustment difficult –  as is the case with any structural change, and as was the case as we moved (unconsciously no doubt) to skew the economy away from tradables firms towards non-tradables.

It is easy for economists to wave their hands and suggest big changes in economic structures and policies. It isn’t usually the economists themselves who are affected.  But our current strategy – the grand Think Big population experiment –  just isn’t working.  It wouldn’t be hard to change it, and in my assessment if we were to do so –  along the lines outlined above –  we put the New Zealand economy on a much better footing for sustained growth in productivity and real incomes/material living standards.  We’d also greatly ease those intense near-term stresses –  particularly housing and infrastructure in Auckland –  that rightly grab the headlines.

 

 

 

58 thoughts on “Slashing immigration really is quite easy”

  1. Your suggestions – what you would do – I would expand item 4.1 to include – at the end of the first 3 year period and applying for a second 3 year work visa they need to demonstrate they have been in full-employment for the initial stint and vouch their earnings are commensurate with the initial approval – ie 3 times the starting proposal

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    • Yes, I think there are all sort of verification requirements needed (and they aren’t so easy to put in place and maintain). Ideally, the verification needs to be rather more real-time, at least for any employers who don’t have a track record of playing the game properly.

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  2. An even easier result can be obtained by shutting down the High Net Worth Visa Program which attracts what can be economic escapees from their country of origin called the white-shoe-brigade who aim straight for AKL, buy in the Double-Grammar-Zone, expense no object, become price setters for the entire street if not suburb which then becomes the de-facto value for the entire neighbourhood – its called the domino effect – the impact just one person can and does have.

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  4. Well analysed, Michael. I agree with you just about 100%, and I hope that the New Zealand First party writes it into its election policy document. That, plus the “taking the “k” out of “kiwi” with regard to the iwi provisions in the new RMA would IMHO lift NZ First to at least 25% of the votes cast come the September election.

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    • That is the MP who’s emails finishes with:

      Spokesperson for Housing
      Spokesperson for Building and Construction
      Spokesperson for Auckland Issues
      Associate Spokesperson for Transport

      Controlling Immigration cannot solve these problems but would ameliorate some of them.

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      • I wish I was more confident he had much chance of being anything other than spokesperson as things stand. 3-1 odds on National + NZF coalition in September.

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  6. Excellent analysis and recommendations Michael. I dearly hope a major party picks these ideas up and runs with them in the next election.

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  7. My list would be a bit different
    – increase the refugee quota a bit – to accommodate privately sponsored refugees
    – leave the Pacific island concessions in place – I think we do have a special relationship here – and the seasonal work programme is a win-win
    -Unlimited temporary work visas- for a max. of three years – but the employer pays $20,000 per year up front. That will kill off the unskilled labour game and capture some of the rents.
    -not shire how this translates to permanent residence – but a target of around 15000-20000 looks OK
    – establish a small class for people who can contribute ( Arts etc.) but who don’t earn much

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    • I like your $20,000 proposal. Something like this applied in PNG – a work visa cost money – not immense by expat wages but way above the average wage for paid employees (they in turn were about 10% of the population). So when my PNG colleagues pointed out I was being reimbursed by my employer fantastic money compared to capable natives I could at least point out that my work visa was probably paying for a couple of teachers.

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    • With a higher overall target, I’d be happy to have some more privately-sponsored refugees, but the proposed 10-15K residence approvals is already not small (per capita) by world standards, and the existing refugee quota is quite a large chunk of that.

      My Pacific Access suggestion was not intended to affect the seasonal work scheme, which is a different programme,

      Inevitably there will some level of the sort of people in your final category. There is, for example, currently a special religious workers category – and Catholic priests get paid very little.

      On work perimits, something like what you suggest sounds reasonable for longer-term positions. but there are plenty of shorter-term ones, where the lump sum fee isn’t quite right (eg a technician doing a two month service on a major piece of plant, whose monthly salary might only be $10000). I’d be a little uneasy about simply relying on the fee, as it risks being an under-the-counter family policy (admittedly only for up to three years).

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    • Actual resident visa migrant arrivals each year is only 17,000 a year. Therefore well within the policy target. International students offered residency has a high churn rate, therefore most will depart NZ within 3 to 5 years. Therefore the target of 45,000 results with only around 15,000 that will stay in NZ

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  8. Good analysis.

    I’d be interested to learn more about the Pacific Access categories – with the conspicuous exception of PNG the Pacific Islands have small populations compared to NZ. Is there something we can do about reciprocal agreements – maybe there are Kiwis who would enjoy retiring to a tropical island if they can retain their benefits (superannuation and access to NZ hospitals).
    I hope and suspect your arguments are beginning to influence the politicians who make the decisions. And your ability to write clearly is way beyond mine. So can you rewrite this point: “permanently eliminate parent visas, except (and even then capped) where there is an enforceable, insured, commitment to full financial support from the parent, or their New Zealand citizen child.” When I read it to the end I entirely agree with you and note you are proposing restarting a source of immigrants currently frozen out. It should be possible to put the words “permanently eliminate” near the end of the point – if other readers are like me and skim read then you may lose the voters who are currently undecided about immigration.

    The problem with changing immigration rules is (a) as you say vested interests resisting some of the changes (b) arbitrary use of power – in my own experience Winston asked a question about Iraqi government officials who had had their residency approved and the result was an application that we had been told would take 3 months took over 7 months (we were from UK and PNG with absolutely no connection with the middle east) – when we asked why the delay we were told they were all too busy reviewing other applications.
    I would love to see your suggestions followed and most of them could be in place by the end of this month but it would still take many months or years for the system to sort itself out and the actual annual figures significantly drop.

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    • Agree it would take a while for the system to sort itself out, but if my proposals were adopted you’d see material effects on the net inflow within 3 months or so (details depend on how much notice is given, and what the transitional arrangements are).

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    • I think the Pacific Access arrangements relate mainly/solely to Samoa, Tonga and Fiji. Cook Islanders and Niueans are NZ citizens and can come and go as they please.

      One might be able to mount some sort of “former colonial power” argument for a special arrangement for Samoa, altho I’m not convinced/ Certainly, the UK has no such arrangements even for its former colonies of settlement, let alone its other former imperial possessions.

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      • I think it is over 50 years ago that the UK government decided people with UK passports from Uganda could not enter the UK.I remember being a totally outraged teenager. Doubt I have ever been more politically angry and unlike most of my views I have never changed my mind a jot. Total disgust. If you offer citizenship and it is accepted then however much you may regret your decision you have to keep your word. Therefore using the UK as an example of anything to do with treatment of former colonies does nothing for me.[ If they had been like the French and made Gibraltar and the Falklands part of the UK there would have been less trouble.] I didn’t need to write this paragraph but I’m happy to get it off my chest.
        I need to read some NZ history. There seem to be so many Samoans in NZ that they may as well be treated as per Australia. Not so sure about Fiji & Tonga but anything that keeps them as friends of NZ is likely to be cheap compared to the national defence budget and achieve similar ends.
        I realise I’m writing from a position of ignorance. We need to know how many and who and what they are doing in NZ and what obstacles they had to overcome.
        The remainder of your points are convincing; just this one I have trouble with because I do not know what is involved.This is how I would write your points:-

        Revisit and review the current Pacific access categories,
        Ensure parent visas do not impose a future cost (pension, health, benefits) to New Zealanders by an enforceable, insured, commitment to full financial support from the parent, or their New Zealand citizen child.
        Reduce the refugee quota and make at least half sponsored by approved organisations

        To convert well-meaning immigration enthusiasm to a thoughtful approach that emphasises what is best for New Zealand you have to be careful with language. Slashing immigration has distant overtones of attacking foreigners; it may put off potential supporters. Something like “aligning immigration rates with those found in successful modern countries”.

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      • I think there is quite a difference between revoking citizenship status (under pressures) – my memory of the Ugandan situation – and immigration access to people everyone agrees aren’t citizens. Thus, once upon a time all Brits and NZers had free access to each others’ countries – there wasn’t a distinctive citizenship. But for decades now there have been distinct citizenships. And I – totally descended from UK ancestors – have no preferred migration rights to the UK (nor do I particularly think I should). We had some complex legal history around the Samoan migrant situation, but no past relationship with Fiji or Tonga.

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      • I went back to the internet and discovered “Government introduced emergency legislation – the Commonwealth Immigrants Act 1968 – and drove it through all its parliamentary stages in three tumultuous days and nights … Upon its face, the 1968 Act was merely applying a familiar set of qualifications for the acquisition of UK citizenship to UK immigration law; but, as members of all political parties, the press and the general public recognised at the time, the real purpose of this provision was to deprive the British Asians of their right of entry on racial grounds.” It lasted 4 years until Idi Amin began imitating Hitler and eventually the 50,000 with UK citizenship and the 30,000 with Ugandan citizenship ended up in the UK and other countries especially Canada.
        I can clearly remember the fudging of figures in the press – we were told of a quarter million East African Asians but it was only 20% who had rights to UK citizenship and we were told we didn’t have the infrastructure (schools, etc) at a time when more left the UK that arrived.
        This kindled my interest in immigration – an issue that very easily becomes ugly and racist but that is no reason it should not be discussed thoughtfully. That is why I am following your blog.

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  9. This is truly depressing Michael.

    “asked if he welcomed signs Auckland house prices were falling, Little said no.”

    From what I read on Interest.co.nz what Andrew meant was a future government he was leading would target house price stability not a structural change in house prices. Even if it was political speak to avoid scaring mortgage holders with policies designed to cause house price falls -it was unnecessary.

    All Andrew needed to say was a future government he was leading would build more houses and target decreasing the cost of new housing as much as possible.

    That both the government (KiwiBuild) and the private sector would be encouraged by new policy settings to build more houses. Over time this would certainly make the new housing market competitive, which in turn could affect the existing house market. But the government does not intervene directly in the existing house market, it does not set house prices -markets do that and markets must be allowed to rise and fall. That is what competitive marketplace economies do and NZ has a long commitment to being a competitive market economy.

    Andrew could also have said, in the long term the most stable and affordable place for housing is a competitive market and governments have a duty to ensure supply factors like urban planning, land supply, building materials and demand factors like tax rules, immigration, foreign investment create a competitive market as possible.

    The fact Andrew did not say these things indicates Andrew has no more commitment to the housing market other than KiwiBuild -i.e. the government building more houses -which by itself is not a structural change. Is Labour committed to a “build more houses and they will be affordable” message or is it just “build more houses and it doesn’t matter how affordable the market is” message?

    Since 2012 I have watched Bill English make sensible noises about competitive land supply and infrastructure financing only to have John Key trump him by saying that there will be no policy changes which will affect the wealth of existing homeowners. The net result is NZ only got tinkering on housing issues and house prices ratcheted up in the secure knowledge that price falls would not be allowed.

    Now we seem to have a situation where Phil Twyford says all the right things about reforming supply and demand, while Andrew Little sends the no radical reform message.

    Michael -you are right with regard to housing. Either NZ radically reforms housing supply or if we lack the political will to do that then radically reform immigration. But if we lack the political will to do anything then nothing structural will change in the housing market. Given the possibility that is the case. Then young kiwis may as well give up on buying a home and making a life in New Zealand. Liam Dann who writes for the NZHerald may well be right -young house hunters should just give up. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11832974

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    • Andrew Little realises that proposing ‘radical change’ of almost anything is not the way to get elected. If elected I hope we do see some radical changes.

      Brendon: I wonder if the government’s accommodation supplements effectively subsidise movement from the country to the city and especially by young people. I found these figures online:
      Accommodation Supplement
      Living in North and Central Auckland $225.00
      Living in other high-cost housing areas $165.00
      Living in other main provincial centres $120.00
      Living elsewhere in New Zealand $75.00
      I suppose it depends on distribution of beneficiaries by location but do these figures indicate rural tax payers are transferring money to city property owners (I own an apartment in Auckland city centre)? If the benefit was a flat figure wouldn’t people move to where rents where lower especially if they could pocket the difference? Long term beneficiaries only??

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      • Accomadation supplements in a supply restricted environment is almost certainly getting capitalised into property values. Given the biggest and most supplements are in the big centres then from this policy the likes of Auckland are getting subsidised by the rest of NZ.

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    • Of course, the doubly depressing angle on this is that Australia is the most open alternative place for young NZers, and their policy mix etc is no better than the one here.

      I suppose my slightly positive interpretation of LIttle’s position is that he might not be unhappy to see prices come down (in nominal terms) somewhat, but is simply scared to say so. a 20% nominal fall over a couple of years, on the back of limited reform or in the next recession, would all else equal take price to income ratios from 10 to 8. With the LVR restrictions in place, few owner occupiers are wiped out with that sort of fall – and perhaps even a bit more over the following few years. then with a bit of inflation and real income growth maybe, just maybe, one could start seeing more satisfactory outcomes (price to incomes < 5) in a decade.

      But even if so that all depends on Labour's willingness (and that of their partners) to do materially more than just Kiwibuild (and say the five year brightline and even restricting negative gearing).

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  10. Prices won’t fall unless you have massive job losses. So if you want house prices to fall just damage the general economy as an easy fix to house prices. This seems to be a standard response to Reserve Bank professional advise to RB governors. Put a wrecking ball to the economy. Raise interest rates to 9% and bugger up local industries and get rid of jobs.

    The reason prices wont fall currently or for very long is because most houses 85% of house sales are bought and sold by locals in the same market ie by people with existing houses. Which means that income has no bearing on 85% of sales.

    eg. I pay $2.1 million for a house. I don’t borrow $2.1million. I borrow just $100k because I have just sold my house for $2m. In a bad market I am never ever selling my house to anyone for $1m because I paid $2.1m for my house.

    But median house prices can fall if we build large scale and if we build high rise. The more apartments we build the average house prices fall because we are building and selling cheaper apartments.

    For once Andrew Little is starting to sound like he knows what it is all about.

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    • New Apartments cheap in Auckland??. Not in North Shore. What can you get for under say $500,000? But given a serviced small section for say $100,000 then you can find plenty of builders advertising online who will build you a 2 bedroom house for about $350,000. As said by MR free up the land and prices will drop like a stone and city apartments will be selling to wealthy yuppies, dinks and lombards only.
      I completely agree with you about large scale if only to minimise the delays when dealing with the tortuous council approval process.

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      • Not being built high enough. You need to get economies of scale. If you go to Melbourne equivalent apartments cost half the price. They are building 30 or 40 level apartment blocks. Our apartment blocks are too short. Most of our apartments do not exceed 5 levels. Still not enough economies of scale.

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  11. Good suggestions and lots of common sense. Sadly I have no confidence whatsoever that any party would implement them or indeed make any changes that result in a substantial reduction in immigration numbers. Part of the reason national has managed to stay in power for so long is due to the labour party lacking coherent strategies and being unable to offer credible alternatives in many key policy areas. The housing market is a perfect example, where Andrew Little is unable to be decisive, and instead tries to sit on the fence, ultimately offering policies that appeal to nobody. People who own property investments want their value to go up, those without property want their value to go down, who wants them to stay the same ? I will go out on a limb and say the vast majority of people with a portfolio of investment properties, land bankers etc are unlikely to ever vote labour. Labour would be better to be decisive and say they want to make property more affordable and if some people lose well they shouldn’t have engaged in such a speculative leveraged investment strategy.

    Similarly when it comes to immigration, a quick cut in immigration numbers would take some of the pressure off housing, infrastructure etc and potentially raise wages for some workers. However Labour again suffers from an identity crisis because they want to help NZ workers, but also have a long standing commitment to liberal ideas around migration. Any reduction in numbers is seen by some in the labour party as a slap in the face to family reunifications, ethnic communities etc. Any changes they make are likely to be a few tweaks around the margins that really satisfy nobody.

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    • So which quick cut to immigration are you suggesting? Don’t forget a migrant includes international students, foreign workers and returning New Zealanders.

      Cut the 125,000 international students creating $5 billion in export GDP?
      Cut the 40,000 foreign workers needed to rebuild Christchurch, Kaikoura, parts of Wellington, Auckland infrastructure, intercity retail, apartment dwellings
      Tell 38,000 New Zealanders they can’t come home?

      Which immigration category are you cutting?

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      • I think our international student visa is just trying to stay competitive with Australia’s policy.

        International students in Australia on a valid student visa can work for up to 20 hours per week while school is in session, and there is no limit on the number of hours an international student can work during recognized school vacations. A work week in Australia is considered to be Monday through the following Sunday. Although they are allowed to arrive in Australia up to 90 days before their course begins, students are not allowed to begin working until after their courses have begun.

        https://www.internationalstudent.com/study_australia/working/student-visa-rules/

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      • Australia has many more work opportunities than NZ for foreign students.

        Here are a few of the categories of visa that are available:

        485 Skilled Graduate Temporary Visa
        This visa is the most common option available to international students after graduating. With a 485 visa, you are allowed to stay in Australia for 18 months to gain work experience only if you have just completed at least two years of study in Australia.

        402 Training and Research Visa
        Another option for international students, the 442 visa is for students to improve their work skills for up to two years while being sponsored by an employer.

        487 Regional Sponsored Visa
        This visa provides a pathway for permanent residency while allowing you to work for 3 years and work in a specialized regional area

        887 Skilled Regional Residence Visa
        The 887 visa awards you permanent residency and with this you can live and work in Australia permanently. You must have already lived in Australia for two years, have a year of work experience and have sufficient points.

        885 Skilled Independent Residence Visa
        The 885 visa allows you to live as a permanent resident and work without needing to be sponsored

        886 Skilled Sponsor Resident Visa
        The 886 visa allows an overseas student to apply for permanent residency and work while being sponsored by an employer.

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  14. So why don’t we look at the hard facts,to 31 Dec 2016: 42,000 came in on work visas, 38,000 were returning Kiwis, 25,000 were students and 17,000 were resident Visa applications. (and 57,000 left, in itself interesting)

    So we cant stop the returning Kiwis at 38,000, they probably all want to live in Auckland too, that’s 38,000 you can do squat about!!,

    25,000 were students and presumably keep the education industry alive so squat all about them, tuning their work hours is just playing at the margin, and you of course ignore the fact they might be making a contribution anyway, hard working, motivated, doing jobs useless Kiwis wont do

    Only 17,000 resident applications, hardly call that flooding the country. As for tweaking these up to high skilled workers, depends on what you define as this, and as you don’t define it I cant comment on it but I suspect I know what you mean. I would disagree with you. I would take anybody from a garbage worker to a CEO provided they were prepared to work, to be self supporting, etc. This would be a balanced approach and not assume that higher qualifications translates into productivity.

    As for work visas at 42,000 your analysis is of course supply side orientated, you demonstrate little understanding of the demand side. Also little understanding of where the demand is coming from regionally. As some one who employs 2 of these here in Wellington, 1 from Ireland and 1 from England I couldn’t do without them. hard working dedicated. I suspect the Chc rebuild is built on them, also the Auckland infrastructure boom, and in Wellington you cant get a tradie for love nor money. I’ve also tried NZ trash but a waste of time, they are all on benefits, petty crime convictions, 4 days and they are all gone, 815 in Kiilbirnie alone last year on work benefits.

    I heard on RNZ this morning an industry leader bemoaning the fact where were they going to get the guys to fix all the infrastructural damage of last week and the stuff coming this week.

    Interesting ideas you have on tweaking immigration but as the hard facts demonstrate it is hard to do!

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    • As I’ve stressed to other commentators, the numbers you are quoting are PLT arrivials. As I have noted, immigration polciy has nothing whatever to do with the comings and goings of NZers – so, as everyone recognises, whatever our policy on letting non-citizens in, there will always be considerable year to year variation on account of NZers’ movements. That is why it is silly to think of targeting the net PLT flow (at least on a year to year basis).

      But most people who are granted residence visas – around 45000 per annum (or around three times per capita the rate in the US) – already in the country when they gain approval. They came first on student or work visas, because the points system is designed to favour such people.

      Re students, I guess we can just agree to differ, but I doubt many people believe that there would have been the huge upsurge in foreigners attending our third tier institutions (the PTEs) without the bait/subsidy of work rights/residence points. I have no problem at all with as many students as want to come coming, provided there aren’t such subsidies attached. But my prediction is that without the “subsidy” the numbers would drop a long way back.

      On work visas, I think you are illustrating the point I was making – the distinction between an individual firm’s perspective (for whom the overall immigration system is a given) and a whole economy perspective. The overall pattern of the economy and employment would look materially different with a quite different immigration policy. Among other things, relative prices would adjust.

      In general, I don’t hold with the “lazy NZers” trope. NZers work as long and hard as most advanced economies – longer and harder than most. There are, and prob always will be, people with a pretty poor work ethic, but changes in relative prices/wages will take care of most specific employer needs. Labour will flow, over time, to where it is most valued. It also makes me uneasy when politicians buy into the business lobby group rhetoric, that reckons our problem is useless NZers and that we should, in effect, trade them in for a new lot of people”, It is cargo-cultism – the treasure is just over the water and will come to delliver us. For our first 100 years or so we made our prosperity, and generated among the very highest material living standards in the world. Personally I think we can do it again, drawing on the energies and abilities of NZers, and trading with the wider world.

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    • There are currently in total 125,000 international students that will spend $5 billion in export GDP. If it were not for these students bringing in billions in February of each year as savings deposits, banks like HSBC would not be able to offer 3.99% 18 months fixed interest rates. It keeps our monopoly banks honest with some competition. Otherwise we would see higher interest rates.

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  15. Some simple facts.

    4-5-6-7 Years back we couldn’t give houses away. There were mortgagee sales and empty houses and rents were barely covering the rates and insurance let alone much else. But we seem to forget all that in this wind up about housing.

    The wisdom of property investing has been and will remain that property prices will double every 7 – 10 years depending on when you enter the market.and purchase. ( Has done since forever and ever.) It has nothing to do with wages, but peoples desire for bigger. better, closer to town and all the emotional stuff that people have in their heads.

    No amount of playing with graphs will tell you about that emotional stuff.

    So where have we gone wrong? What changed that caused all this demented carry on?

    1. Population of permanent Kiwi’s has resumed a growth rate because many are returning. Remember we lost how many thousands for the last 20 years i.e. when housing was cheap. so that didn’t stop them leaving.
    20 years times 30,000 or so = ?

    2. Because they left we didn’t build any houses. We didn’t need them. Many left and rented their houses to others so when they returned they repossessed their own homes.

    3.The govt. and the Education sector decided ti was a brilliant idea to bring in thousands of students. More money they said. But they didn’t build any more houses so the students filled up existing rental houses. See 2 for what happened next.

    4. The Govt. decided that we should grow our tourism. It did and this last year we added 3.5 million tourists to our population i.e. 9589 extra people per day that needed accommodation but still we only added a lot of extra camper vans. So without Airnb we would have been right in the crap.

    5. The govt. decided that it would continue to allow refugees and immigrants with work visa’ to come as they please. Still they didn’t build any houses. So these guys rented someone else’s house. Had it been mandatory for those importing these people to provide extra housing for these guys and had the education sector been required to do the same then some constraints would have been on the numbers. But no it’s all care and no responsibility. someone else will do that.

    6. The Christchurch earthquake removed some 7500 houses from the landscape and damaged many more. Those that were totaled equaled a years housing at the time. Many of those people just moved to other parts of the country. Bought up existing houses thus creating a demand. No more houses were built. Christ church built enough to replace some locals and to accommodate workers who came to CHCH for the rebuild.

    7. The Govt. and Councils failed miserably to free up land anywhere that mattered and I doubt what they have done the other day will make much difference. Developers are not stupid. They are in it for the money and there are high costs that go with developing for both the councils and the developer. Developers need deep pockets for the job and if you haven’t then you go broke. A good example being in Tauranga where The Lakes was a consequence of that. ( We should also include a lot of projects in Queenstown.)

    8.The Govt. in its apparent wisdom decided that we needed all manner of stuff built into houses, you know double glazing to warm a house in Kaitaia, Insulation in that same house. apparently putting a jersey on just wasn’t going to work. We can understand that wisdom once we go south but in the winterless north?

    9.No matter how much crowing about affordable (which now seems to have morphed to $600K), the issue with affordable that stops everything in its tracks is covenants. Covenants force builders to build houses at a greater spec than is need for a couple of young people wanting a basic home. Outlaw them and see things change.( I commented a lot on this the other day) It is the single biggest obstacle to low cost housing. Not having them allowed the cost of basic housing in the 70′ to be low cost. Most of those houses are still on their sites.

    So to sum up, interference in the market place by communists and socialists are the cause of the housing failure.

    Its easy to see.

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    • I don’t know what type of house you prefer but just search your favourite property website in say Oamaru or South Taranaki and you will get instant proof that great homes are available at cheap prices. The problem with the housing market is location, location, location. Why does everyone want to live in or near to Central Auckland?

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    • 1. Agreed, when there are plentiful jobs and the economy is buoyant, that’s how we attract and keep our young in NZ. There is not much point focusing on productivity when jobs become displaced. US productive capacity and productivity has been increasing even though that the general perception is that China’s wealth has been at the expense of the US worker. The US worker has been displaced by massive investment is robots. US industry continues to grow at the expense of the US worker.

      2., 3. 4. Yes, high interest rates decimated NZ industry and that meant a huge exodus of our young to find work elsewhere. When National took over the economy was a real mess and in a deep recession. National took the most resilient remaining industries and drove those into growing at an accelerated pace. Those happen to be Milk production, international students and tourism. Surprisingly easy and quick turnaround in the NZ economy with a spillover back into the local economy.

      Note that tourism has peak seasons with the peak over only 150 days. This means that accomodation required over peak months would be more towards say 15,000 extra people a peak day rather than 9,589 people evenly spread throughout a year.

      5. Air BNB launched last year and now has 19,000 registered residential properties for travellers.

      6. Kaikoura earthquake is a $8 billion to $10 billion rebuild and also 16 buildings in Wellington has been condemned adding fuel to fire. Foreign construction workers to the tune of 40,000 brought in the last 12 months for Christchurch which is a long $20 billion reconstruction still in progress, for Kaikoura, for Wellington, for Auckland.

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  16. Michael could not agree more, New Zealanders are probably the best employees in the world. I employ those same people in my business too, along side the other 2 previously mentioned.

    But the sad fact is a few small percentage support a huge welfare base in NZ. At 5% we are at the bottom of the barrel. 30, 40, 50 years of welfare has had an inter generational effect on some potential workers. There are an additional 90,000 young people out of work too, presumably priced off the market as I cant employ them to sweep the floors at $10 per hour to get a step on the ladder.

    Sorry cant wait for relative prices to adjust, the country needs people of all levels who are prepared to work now.

    Sadly our economic failure cant be sheeted home to one economic issue, immigration, it would be nice if it could but as a country we have chosen to fail, or rather to be ordinary. Our politicians, our political leaders, our city and regional councillors, our education system, the most generous welfare system in the world, our tax system..I could go on, all less than optimal, and yes I agree our immigration system could be better too

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    • In 2008 less than 0.5% (around 15k) of the New Zealand workforce was long-term unemployed (6 months +). You are repeating myths, not “sad facts”. New Zealanders work when there is work. Given the appalling way beneficiaries are treated, it’s not surprising.

      So, those 90k young people would have almost all got jobs at normal wages eventually, and there would most likely be exceptional circumstances involved for those who didn’t.

      One person’s “step up on the ladder” can look like a chance to exploit to another, and a chance to push somebody more expensive off the ladder.

      I don’t think we have done that badly in economic terms, but New Zealanders have definitely lost a lot in terms of quality of life. If there is anything to blame, I firmly believe it’s a “politics of greed” which seeks to exploit the less advantaged, and to cement inequitable policies in place by making them politically harmful to remove.

      I believe excessive immigration and the housing bubble are a direct result of that.

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      • New Zealanders have not lost anything. They do not have to live in expensive suburbs. There are still lots of cheap suburbs available all over the country. The beaches, the beautiful scenery are all still accessible and are all still free. Cut out Dairy cows and we will also have swimmable lakes and waterways.

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  18. Vikingonmars interesting on Tourism, we would all agree an important part of our long term growth model.

    I liked your comments on ‘housing” too but I would use the less emotive word “accommodation” rather than “housing” as the accommodation market as you inferred is made up of a whole subset of markets, there is of course the house market, there is the hotel market, there is the hostel market, there is airbnb market, there is private individuals providing accommodation market, there is the taking in a boarder market (aka a foreign student), there is the camping ground market, the living in your car market (freedom camping :)) the list goes on and on, and they all have different supply and demand drivers, and to quote Michael “relative prices”. All these markets are dynamic and adjust to meet market conditions. Clearly the price of a 2 bedroom apartment in downtown Auckland has no relationship to an airbnb room in a house in Marton!

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    • The problem is that 2 bedroom apartment in Auckland is also available on Air BnB because we do not have enough hotels in Auckland. I have received a dozen overseas visitors this year. All of them have used airbnb for their apartment bookings. None of them have used hotels.

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  19. Would you pay $10 for your flat white? Or $30 for your Chinese stir fry?

    If that’s a yes, and you know of a few others that agree, I am all for it.

    However, the hospitality industry underpins tourism, which I daresay would have a bigger impact than dairy farms beating about higher wages.

    On Wed, 12 Apr 2017 at 10:30 AM, croaking cassandra wrote:

    > Michael Reddell posted: “There is a story on the excellent news Newsroom > site this morning on immigration. When I printed it out at about 8am, it > was running under the headline “Slashing net migration not easy”, although > forty minutes later that had been revised to “Few answers ” >

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  20. James

    I’m not sure what Queenstown prices are like now, but I assume you are talking of something like doubling selling prices.

    If that were what happened it would be an astonishing confirmation of the argument made by those who claim that our immigration policy has dramatically lowered wages of relatively lowly-skilled NZers.

    But I’d be very if it is what happened. Again, it is the distinction between the individual firm perspective and that of the whole economy. I can well believe that if, say, you alone were unable to hire migrants you might find it very difficult to operate and might face a major increase in your costs. But for the economy as a whole, cut back immigration markedly and you would overall demand in the economy fall back quite a bit (all that research evidence that suggests demand effects exceed supply effects), dampening overall labour market pressures. People displaced from population-growth-based industries would be looking for work elsewhere. In some sectors that have been particularly heavily reliant on immigrants, you might see some upward wage pressure (hence my dairy example, but it might also be true in tourist hotspots) but overall it would be very surprising – quite contrary to all the research evidence internationally – if you were see the sorts of changes in wages rate that might lead to pressure (across wide sections of the economy) for selling prices to double.

    Recall that there are plenty of successful advanced economies with very little immigration. And people in those countries aren’t smarter, more skilled, or more willing to work than NZers.

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    • You have to be careful about your migrant comparatives. In Australia a definition of a migrant does not include international students, does not include temporary workers, and does not include returning Australians. In New Zealand, we define a migrant to include international students, we do include temporary workers and we do include returning New Zealanders.

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  21. While refreshing my memory of the UK and East Africa Asian immigrants in the 1960s I came across this website: https://asadakhan.wordpress.com/2010/06/30/british-nationality-claims-the-case-of-the-east-african-asians/

    And it contains this paragraph (just change UK / EU to NZ / Australia and it is relevant.

    Acquiring British citizenship brings with it many opportunities and benefits. The most obvious is the ability to settle in the UK, and the extensive financial and social support that British citizens can be eligible for both in the UK and abroad. Access to the Free National Health Service, and eligibility for social benefits such as housing, and income support is highly valuable. The children of British Citizens have access to high quality free education at primary and secondary school, as well as reduced fees for University and the possibility of grants to assist with the costs of higher education. Citizenship also enables individuals to take advantage of the benefits of being European Union (EU) citizens, such as ease of travel and residence throughout the EU, and the opportunity to work in other EU countries.

    The web-page ends with “Contact us today for a free assessment of your case.”.

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  22. Sorry Michael, it is you who is confusing the whole economy thinking with the firm example. I am backing my views that are applicable to the whole economy with my form experiences.

    90,000 youth unemployed.. Fact

    No carpenters, tradies, labours available in the major cities, real wages have already risen and are continuing to rise for them. This is a fact…nobody wants to employ the NZ dross at $25 or $30 an hour, they simply don’t know how to work. You have your arguments the wrong way round.

    Anyway markets are adjusting, AirBNB as GGstuff pointed out, Office buildings in central Wellington turned into aprtments.

    I lay the blame squarely at the feet of the Reserve Bank and its failures, not migrants. Its failure to use interest rates to moderate demand and supply for money, its abject failure to control the big 4 banks eg their ability to borrow money offshore to lend onto the housing market, the abject failure of the RB to properly stress test the banks, the failure to limit credit creation by non interest rate means, the failure to demand that banks only lend to certain class of customers, the failure to impose high reserve ratios, the failure to force banks to issue bonds to the NZ market to fund their credit creation activities.

    Also please explain this comment with some concrete examples “Recall that there are plenty of successful advanced economies with very little immigration” what Japan.. Germany China (with massive internal migration ?)

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    • Ross MC, I completely agree with you that the RB is at fault in decimating our industries. At this stage QE for NZ is too risky. QE in NZ was only possible when the US was running a massive QE program. The Christchurch Earthquake needed to be funded to the tune of $30 billion. If the RB had moved quickly Christchurch would have fixed done and dusted. But instead the government being reluctant to borrow has dragged out the Christchurch event making piecemeal repairs which will drag out over the next 30 years.

      The next event in Kaikoura is now another $8 billion dollar repair. The government will also drag this out. That’s why when you ask when light rail will be completed for Auckland, The government is responding with a 30 year plan. There is just no money available.

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