The Productivity Commission has been charged by the government with reviewing immigration policy with a view to identifying “what working-age immigration policy settings would best facilitate New Zealand’s long-term economic growth”, with a specific emphasis on productivity.
The draft report came out in early November, and I wrote a couple of sceptical/critical posts on it (here and here). The Commission invited submissions on the draft report (submissions close on Friday) and I’ve just lodged my submission. The full text is here:
Submission to the Productivity Commission inquiry on NZ immigration policy Dec 21
Most of the material in my submission will be familiar to regular readers, so I’m not going to quote extensively from it here. My overview was as follows:
There are plenty of individually interesting bits of material in the report (and supporting working papers) but overall, I’m left with the impression that the Commission has not yet done adequately what was asked of it. Specifically, in the Terms of Reference for the inquiry, you are invited to “explore what working-age immigration policy settings would best facilitate New Zealand’s long-term economic growth and promote the wellbeing of New Zealanders”, and in the next paragraph the connection to improving productivity is explicitly highlighted. Your draft report seems to touch on many of the more-detailed points listed in the Terms of Reference, but does not sufficiently stand back to evaluate the way in which immigration policy has (or has not) been contributing to productivity growth and material
living standards of New Zealanders.Doing so well would require at least a pretty comprehensive review of New Zealand’s experience with large-scale non-citizen immigration over recent decades (arguably informed by the earlier post-war large scale immigration experiences that ended in the 1970s), including recognising that our approach to immigration policy has been something of an outlier among advanced countries, occurring against the (also unusual) backdrop of a very large net outflow of our own citizens. Without something of that sort, informed too by relevant overseas experiences and by a detailed engagement with the stylised facts of New Zealand’s dismal productivity record (recognising that the scale of New Zealand’s
immigration policy structural “intervention” has been huge), it is difficult to see how you can reach a view on what future immigration policy would be most suited to maximising, all else equal, New Zealand’s specific economywide productivity prospects. Moreover, nothing at all in the report seriously engages with the literature on economic geography, surely a startling omission when New Zealand immigration policy involves inviting large numbers of people to relocate to the most remote outpost in the advanced economy world, with the policymakers responsible claiming to have had explicit economic motivations for the policy.Consistent with these omissions, two of the three highlighted Preliminary Recommendations are primarily process oriented, and the third is really a second-tier issue around absorption capacity. Other suggestions, some sensible, some questionable, play around the edges of the issue, perhaps focused simply on refining something like the last decade’s status quo. None gets to the heart of the issue: what sort of immigration policy should New Zealand run in future, if governments were interested in maximising the productivity and income prospects of New Zealanders?
The rest is there for anyone interested.
I had a quick look earlier in the week through the submissions the Commission had already received. The one that most caught my eye was a second submission by someone called Mike Lear (he’d already made a submission prior to the draft report). I don’t know who Lear is, although I deduce from his submission and this footnote that has had some past exposure to economic analysis and economic policy issues.
34 When I started work in the Department of Industries and Commerce in 1972 (in the newly formed
Productivity Centre!) I was told by the most senior person in the department responsible for overall industry policy that New Zealand should aim to be the Switzerland of the Pacific region for machine tools.
It is a very well-written submission, almost certainly easier to read than my own. Much of it represents a fairly trenchant championing of the “Reddell hypothesis” (the idea that our large-scale non-citizen immigration policy has detracted from New Zealand’s productivity performance) and point by point pushback on various points made (or ignored when they should have been made) by the Commission in the draft report. I don’t agree with every line of his submission, even where he is writing about my ideas, but it is a particularly clear and useful articulation of the arguments and identifies numerous issues that the Commission really needs to grapple with before publishing a final report next year.
Here is his Introduction
It will be interesting to see what the Commission comes up with in the final report. There is an opportunity to do a really valuable report standing back and asking how best this major structural policy intervention can contribute to improving our dismal economic fortunes. Or the Commission can keep to where the draft report got to, and focus mostly on process issues and tweaks (some sensible, some not) to the (pre-Covid) status quo. The former seemed to be what the government invited the Commission to do when it set out the Terms of Reference for the inquiry.
croaking cassandra 
I assume this is the same Mike Lear who was a general manager at the former Ministry for Economic Development and then a policy director or similar. I had some dealings with him and he is a fairly sharp (intellectually) and forthright character.
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Thanks – that would make sense.
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There is bound to be some out there who want another cook or aged care assistant.
How do we get through that together with the high net worth bolt holeseekers we should set up a the ‘premium’ destination increasingly crowded planet?
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Thousands of chefs have come into the country in the last few years (up until Covid) yet there is always a shortage! I should think that makes it obvious that employers need to improve the pay and conditions to retain staff. If this means increasing prices or reducing service than we’ll have to suck it up!
With the current staff shortages, eating places are adapting and the world doesn’t seem to have ended! Do we really need to restart importing hundreds of thousands of relatively low skilled workers?
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There will be a demand for a chef, for a care-giver, for a chief economist, for a neuro-surgeon, for a journalist, for a rugby player and so on and on. The usual way of settling a demand is to put a price on it. If the restaurant owner is willing to pay more than the rugby team for the privilege of a NZ work/residency visa then let them pay.
Of course it is not quite that simple but it is still better than our current system that results in rorts and corruption while correspondingly handicapping honest businesses.
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I think the issue is what Karl du Fresne called the media “cabal”. The best the public will get to hear is something with Paul Spoonley in it [warning contains Paul Spoonley].
We need an independent series of discussions (like GB news).
I’m not impressed with Bernard Hickey’s When the Facts Change, it is full of activists and vested interests.
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I think the best place to start is to zero immigration for a year, remove 50% of Bureacrats and tell the remainder that their continued employment relies on them producing solutions not obstruction to their employers (Tax & Rate Payers). Once people are freed from obstruction and allowed to innovate/be creative productivity will improve and if it doesn’t rename the country the Soviet Socialist Republic of Gay o o f tears and settle down for a miserable existence. If it works and shows promise then the type and skill set of immigrants will become more obvious and policy can then be formulated accordingly. Sounds harsh, yes but tinkering solves nothing and I have yet to hear anyone singing the praises of the bureaucrats they have been forced to deal with and the substantial increase in their number since ardern was appointed PM have not improved anything.
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The primary purpose of the Productivity Commission these days seems to be acting as a cheer leader for Government policy, whatever that may be. So, they must have faced quite a dilemma with this review. The explicit purpose may have been to advise the policy settings that would contribute most to economic growth and productivity, but they know perfectly well that those aren’t policy objectives of the Ardern Government. So what to do? Kick for touch and discuss some of the detail while avoiding the big questions seems like a pretty sound plan in the circumstances.
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This bit from Mike Lear’s earlier submission is nicely put, too many fail to get think sufficiently deeply to realise this or the extent of its impact.
“11. Sometimes commentators argue that our small size should not be an obstacle,
because other small countries, such as Denmark, are top economic performers.
The comparison makes no sense. Denmark (for example) is part of a continent of
over 750 million people. We are reportedly also part of a continent, but apart from
us it’s almost all underwater.”
However this also glances sight of the solution, the resources of a continent, with even modest extraction rates with high costs, represents a lot of wealth for a small country.
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One thing that’s clear to me is you can’t allow “the market” to decide immigration policy. Many of the immigrants that came into NZ in the last 20 years are already retired and no longer part of the work force.
The hands off approach that allowed our population to rise from 3 million to 5 million in 20 years attracted the wrong type of immigrant and has caused house prices to rise to unaffordable levels which will keep a generation of younger NZers out of home ownership. I fortunately bought a house in the 1990’s but I do worry about my kids.
The argument in the 1990’s was that aging populations due to low birthrates in Western nations, and also some Asian countries like Japan, meant that immigration needed to be encouraged. But these other countries, like Denmark or Japan haven’t increased their population significantly in the last 20 years, unlike New Zealand.
I would favour an immigration growth limit, that would convert into a quota system where by the Immigration Department would limit arrivals each year to within a certain band. Nobody seems to want to talk about what an ideal population for NZ would be? Let’s talk about “sustainability in population”. I personally feel things were better at 3.5 million than at 5 million. Those who really benefited from population growth were of course the landlords who saw lovely tax free capital gain, (and of course many MPs are significant house investors) but is New Zealand a “better country” than it was in 2001? (And I’m thinking quality of life and affordability for all segments of society).. I don’t think so, immigration policy (if there ever was one) of the last 20 years has been an mistake.
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