Is the government doing some serious thinking about immigration policy?

The general impression since the formation of the new government has been that this government –  like its National and Labour predecessors –  is largely a champion of the large-scale immigration programme New Zealand has run for decades.  That impression has only been reinforced by the way corporate interests –  probably especially the export education industry – appear to have persuaded them to back off, at least for now, from even the modest changes around student work visas that the Labour Party had campaigned on.  But then I noticed this advert in my in-box (and no, I am not looking for a job) from a firm that describes themselves as “public sector recruitment specialists” (emphasis added).

Principal Policy Advisors x 6

· Be involved in a new high profile programme of work
· Own and drive strategic policy and lead complex policy programmes
· Bring your fresh perspective and challenge the status quo

The Challenge
We are looking for six Principal Policy Advisors that are keen to take part in a unique government initiative, across five different policy domains.
As thought leaders, your work here is set to impact the New Zealand economy, its labour market, and immigration policies.
This is an opportunity to challenge your selves to put forward new ideas and bring a fresh perspective on managing one of New Zealand’s biggest and most complex issues.

Six Principal Advisors  – who don’t come cheap –  is a serious commitment of resource to whatever this “unique government initiative” is.

I don’t know what the project is –  perhaps someone could ask the Minister of Immigration or the Minister for Economic Development –  but in tight fiscal times, it certainly looks as though some agency has been found the money for something fairly significant on immigration policy.  If so, of course, it is not before time.

UPDATE (20/3):  A few days after this post this comment came in, and has been showing below.

Clive Horne

That seemed quite startlingly incompetent.

I had a further note from Mr Horne this noting that “unfortunately MBIE are still receiving enquiries around this. As mentioned the roles are around the teams involved in the labour market issues and are to fill existing vacancies not focused on a new initiative”.   At his request I have elevated his earlier comment into the body of this post.

And, as far we can now tell, there is no new thinking going on about immigration and economic performance, and MBIE has still not published the (well overdue) annual data on approvals etc under current policy (when I asked the other day, I was told it should be out by the end of April, six months late on the normal schedule.

Please improve immigration data, not undermine it

On her visit to Australia, the Prime Minister has been quoted as suggesting that departure cards might soon be discontinued, and that she will be pursuing her Customs and Statistics ministers on the matter.

I’m sure airlines and airport operators hate the cards.  There have been prevous efforts to get rid of them.  They are, nonetheless, a core element of the data collections (in conjunction with arrivals cards) that give us some of the very best immigration data anywhere.  In a country with –  year in, year out – some of the very largest immigration, and emigration, flows anywhere in the advanced world.

I wrote about this a few months ago when, under the previous government, Statistics New Zealand publicised the possibility/likelihood of departure cards being discontinued.  At the time, SNZ suggested that

“In the near future, the outcomes-based ‘12/16-month rule’ is expected to become a key component in how we determine the number of migrants in New Zealand.”

The “12/16 data” are the new series of permanent and long-term movements derived by lining up, using passport details, people coming and going, and waiting until more than a year after the initial movement to see if the movement loooks permanent or long-term.    It is all very interesting – I’ve praised SNZ for putting the collection in place –  and provides a more accurate measure of actual long-term comings and goings than the (stated intentions based) arrival and departure card.   But it is only available with a very long lag  (ie more than 16 months), whereas the existing PLT data are available monthly, with a few weeks lag (and in principle could be produced even more frequently).

I’m reproducing here the concerns I expressed in September

I’ve explained here previously why the resulting PLT data has its limitations.   It isn’t a good basis to use to look at immigration policy itself.  Approvals data from MBIE is better for those purposes –  and would be better still if they made the information available in an accessible format on a more timely basis.     And the PLT data are based on self-reported intentions, and intentions aren’t always what people end up doing.  Some people think they are leaving permanently, and are back six months later, and vice versa..   But intentions data isn’t nothing either  (just as business surveys capture intentions/expectations and things don’t always turn out as they expect).    The patterns –  and especially the cyclical patterns, the turning points –  in the PLT data tend to match those in the (lagged) 12/16 data quite closely.

There are quite enough gaps (and long lags) in New Zealand economic data as it is –  monthly CPIs, monthly manufacturing data, quarterly income measure of GDP just for starters –  that I’m just stagggered that key economic agencies are apparently willing to let SNZ/Customs go ahead and consider dropping departure (and arrival?) cards.  Where are Treasury and the Reserve Bank on this?

How, specifically, does it matter?   Without departure or arrival cards we would, of course, still have immigration approvals data for most non-citizens (other than Australians).  In principle, they could be published weekly or monthly with just a day or two’s lag, and be available in quite accessible formats.  Since approvals lead actual arrivals, there is certainly useful information in those approvals numbers (it is just that they aren’t made easily available now).

We could presumably also have data on the total number of people crossing the border (gross and net) from passport scanning.   I’m not aware that those numbers are published at present, but they could be.  And presumably they could be broken down by nationality (or at least by the passport the person happened to be travelling on).    That would be useful –  relative to having no arrivals or departures data –  but not very.   If you look at total net arrivals or departures (or net) data it is enormously volatile, and thrown around things like Lions tours –  in other words, holidaymaker and other short-term visitor numbers swamp movements of migrants.   Using that data alone, we’d have no ability to pick turning points for some considerable time after the turn had already happened.

The gaps would be particularly serious for the movement of New Zealanders, and more than half the variability in the 12/16 measure of net migration has arisen from fluctuations in the movements of New Zealanders.  We would have no secure way of knowing if someone leaving was planning to be off for a week’s holiday, or intending to stay away for ever.  The 12/16 method would eventually tell us what they did –  but there is a lag of almost 18 months on the availability of that information.    And even if the new plan involves keeping arrival cards and only getting rid of departure cards, most of the variability in New Zealanders’ migration movements is in the numbers leaving, not the numbers arriving.

Less importantly, without the departure cards we would seem likely to lose the ability to analyse migration (including reflows outwards by migrants who become NZ citizens) by the birthplace of the migrant.

Perhaps someone has done a robust cost-benefit analysis on getting rid of departure (and arrival?) cards.  If so, I would be keen to see it, and particularly keen to see how the relevant officials have factored in the loss of some of world’s best migration data to macroeconomic monitoring and forecasting, in a country with some of the most volatile immigration flows in the advanced world (and not a great track record of getting monetary policy, or housing markets, right as it is).  And even if one sets aside the macroeconomic analysts interests, it is not as if net migration numbers are one of those issues of no political salience at all.  Put an 18 month lag on decent data, and you risk not silencing debate – which some might wish for – but allowing all sorts of misconceptions and concerns to flourish, which no one will be in a position to allay.  It would, frankly, seem crazy.    Immigration has a economic and political salience here which it might not have in a country with land borders and small permanent inflows/outflows.

Frankly, it looks like a pretty irresponsible proposal.   The departure cards provide the only information on what New Zealanders are doing, and the comings and goings of New Zealanders are a big part of the PLT migration story (and aren’t, of course, under government control).

And in case anyone thought the PLT numbers were simply flaky measures, with no information

…here are the total net flows on the two measures [12/16 in blue, PLT in orange]


They don’t match up perfectly –  one wouldn’t expect them to, and there is information even in the differences (eg what led people to change their plans) –  but no analyst would happily give up a series that provided a 17 month lead this (relatively) good on the 12/16 series.

Turning points matter a lot for macroeconomic analysis and monitoring, and the turning points in the two series are very similar.

The claim from Statistics New Zealand is that they can fill the gap with estimates that

will be generated through a probabilistic predictive model of traveller type (ie short-term traveller, or long-term migrant), based on available characteristics of travellers. Such a model will provide a provisional estimate of migration, which we can then revise (if required) as sufficient time passes for us to apply the outcomes-based measure.

I hope that they plan to rigorously evaluate the accuracy of such models, including when they’ve worked well and when they haven’t, and how well they capture the effects of policy changes, and that they expose their models and evaluation to external scrutiny before scrapping such a valuable source of hard data as the departure card.

And talking of data gaps, I’ve also written here before about the very long lags in MBIE making available, in readily usable form, the summary administrative data on actual immigration approvals (and estimates of the stock of migrants).   Some of the data you can get yourself, if you don’t mind manipulating spreadsheets that are hundreds of thousands of lines long, but for most people, for practical purposes, the data are really only available annually, and typically with quite a long lag.    That is really inexcusable.  Like it or not, immigration policy is a major instrument of government economic and social policy, and approvals data (and associated stock estimates) are a valuable part of informing the public debate.  Information is almost always better than no information.

[UPDATE: A reader highlights that not even the spreadsheets are currently available.]

MBIE publishes the summary results, and accessible tabular data, in their annual Migration Trends and Outlook publication. In many respects, it is a very useful publication, even if (a) the data are only annual (whereas, say, building approvals data are available monthly), and (b) the publication has a minimum lag of 4 to 5 months (in other words, data for the full year to June 2016 was only published in late November 2016).  That isn’t remotely good enough, especially for administrative data.  Neither MBIE nor SNZ has to collect the data –  it all sits in MBIE’s own systems, generated every single working day.  There is no obvious reason why the data  – all the summary data (number of approvals in each category, occupation, age, sex, country of origin etc) –  couldn’t be made accessibly available monthly within a few days of the end of each month.

I’ve made these criticisms previously.  And that was when Migration Trends and Outlook  was coming out on its normal slow timetable (a 5 to 17 month lag).   But go to the MBIE website looking for the 2016/17 publication –  in March 2018 –  and it still hasn’t been published, more than eight months after the end of the year in question, 20 months after the start of the period to which the data would releate.

Some readers might be inclined to suspect MBIE of some deliberate strategy to keep the information from the public.  I’m not.  That is not only because I’m not naturally a conspiracy theorist, and have had plenty experience of the failures of bureaucracy. It is also because a few months ago I was invited to a meeting by an MBIE official who was part of a team working on improving the Migration Trends and Outlook publication, looking for my comments/ideas on data, immigration research etc  The official seemed quite genuine, and enthusiastically told me of the efforts MBIE was putting in to improving the publications, and (if I recall rightly) the timeliness of the data (even while stressing that it was quite hard and there were “systemss issues”.  That meeting last year would have been before the usual publication data of the Migration Trends and Outlook publication, so I came away from the meeting quite encouraged.   I’m still quite willing to believe that MBIE has the project in hand, but in the meantime……where is the 2016/17 data?  It is now March 2018.

Remote regions, immigration, and prosperity

A couple of years ago I did a post on some remote and very small places, many of which had quite a lot of land and very few people.  My point was to suggest that New Zealand was quite unusual in having so many people in such a remote spot, all the more so when much of the population growth had been accounted for by deliberate immigration policy.    As readers will know –  apart from anything else, I keep pointing it out –  over at least the last 70 years, productivity growth here has been pretty poor and we’ve drifted a long way down the global league tables.  My proposition is that the two stylised facts aren’t unrelated.

At the time of the earlier post, my young daughter was fascinated by a book on remote islands.   At the moment –  a bit older now –  she’s got really interested in Wales and keeps telling me all sort of interesting snippets.  But talking with her about Wales reminded me that at the time of the Lions Tour last year I’d been meaning to write a post highlighting just how little population growth there had been in some of the outer reaches of the United Kingdom.

More generally, I’d been thinking about how global studies attempting to assess the economic impact of immigration focus on comparing across countries.  In some ways, that makes sense –  data are often easier to come by, and countries control immigration policies.    But I suspect there is information in the experiences of remote regions.   After all, if there were typically really good economic opportunities in remote regions, people in a country are free to move there.  The population of the United States, for example, has risen by over 200 million people in the last 100 years –  through a mix of immigration and (mostly) natural increase.  Those peope have been free to locate themselves where the best opportunities are.   One can think of parts of Canada or Australia in the same way.  And if our politicians had made different choices in the 1890s, we could simply have been part of the Australian Commonwealth, and it seems unlikely that the economic opportunities here would have been much different if that choice had been made.

Here I’ve focused on the last 100 years or so.   Why?  Mostly because just prior to World War One New Zealand had probably the highest (or 2nd or 3rd highest) GDP per capita of any country in the world (per the historical tables put together by Angus Maddison).  But it was also some decades on from the first big waves of colonial settlement (whether here, Australia, Canada, or the mid-west and west of the United States).  At around 1 million people in the 1911 Census, New Zealand was already a functioning country of reasonable size (not large, but there are many smaller countries even today).

In this table I’ve focused on population growth between the Census nearest 1910 and the most recent Census (in most cases 2010 or 2011, but in New Zealand 2013).   The chart shows the percentage increase in population for these remote regions of countries, plus that for New Zealand  (Nebraska gets chosen as a “remote” US area mostly because I happen to have been there a few times.)

remote regions

Australia and Canada (and the US) have had rapid national population growth rates, but these remote regions  (Nebraska, Newfoundland, and Tasmania) have had much lower population growth rates than New Zealand.  (And, on checking, each of those three have lower population densities now than New Zealand does.)   But given that all of these regions have small populations, relative to the respective nation’s total population, there would have been nothing to stop lots of people gravitating to the remote spots if there was real evidence of good economic opportunities for many people in those places.

It has, after all, happened in some remote regions: West Australia for example, now has about 10 times the population it had in 1910, presumably attracted by the mineral resources that mean West Australia has the highest GDP per capita of the Australian states.    And two really remote parts of the United States –  which I didn’t show on the chart, partly because they were settled so much later (not admitted as US states until 1959) –  are Hawaii and Alaska.  Both have had faster population growth than New Zealand over the last 100 years (although between them only around 2 million people in total): in Alaska’s case no doubt the oil resources attracted people (Alaska also has among the highest GDP per capita of any state).

But over that hundred years –  or any shorter period you like to name really –  New Zealand (like Wales, Northern Ireland, Tasmania, Nebraska, or Newfoundland) has had no big natural resource discoveries, or asymmetric productivity shocks specifically favouring our location.   Like those places, we’ve only had the skills of our people and the instititutions we’ve built or inherited (in the case of this group a fairly-common Anglo set) to make the most of, and to overcome what appear to be the resurgent disadvantages and costs of distance/remoteness.  Our birth rates won’t have been much different over long periods, and New Zealand like all these places –  the Shetlands most extremely of the places on my chart –  have seen outflows of our own people.  The big difference here is immigration policy, which has actively sought to substantially boost the population.

Try a thought experiment.  Say the New Zealand and Australian governments had simply combined their respective immigration policies over the last 100 years or so  (eg if New Zealand was offering 45000 residence approvals per annum and Australia 200000 –  similar to the current policies –  the two countries simply said we’ll issue 245000 residence visas and the arrivals can go wherever they like), what would have happened.   By construction, the total population of the two countries would have been pretty much the same as what we actually see (5.4 million in 1910, and about 29 million now) but what would the distribution look like?     We know that in Australia –  given the same choice –  the remote region with a mild climate and no big new natural resources (Tasmania) saw much weaker population growth than the rest of Australia.   Why wouldn’t it be the case that New Zealand would have experienced much the same phenomenon?    At Tasmania’s population growth rate for the last 100 years we might now have a population of around 2.5 million.   After all, for almost 50 years now native New Zealanders have (net) been relocating to (the non-Tasmania) bits of Australia, so why –  given the free choice –  wouldn’t the migrants –  facing a free choice at the point of approval –  have done so too?

Would we have been better off?    The migrants who went to Australia instead presumably would have been –  both judged from revealed preference (they made the choice) and that incomes in Australia are higher than those here.  I’d argue that the smaller number of New Zealanders probably would have been economically better off as well.  Natural resources are still a huge part of the economic opportunities in these remote islands –  perhaps still 85 per cent of our exports –  and those limited resources would be spread across a considerably smaller number of people.  For those who simply prefer “more people” for its own sake, perhaps they’d have been worse off –  but then such people could have self-selected for Sydney or Melbourne (as Tasmanians of a similar ilk do, or people in Newfoundland who wanted to be part of something big self-select for Toronto).

I’m not suggesting something conclusive here, just that people pause for thought, and reflect on what questions the experiences.    For a remote place we aren’t particularly lightly settled, and especially not as a remote place without the sort of abundant natural resources of –  say –  a West Australia.  We’ve had no distinctive favourable productivity shocks, and we’ve long lost any claim to be the richest (per capita) country on earth.  It is no surprise that some people want to move here –  plenty would want to move to Nebraska if it had its own immigration policy like ours – but there isn’t much evidence, from experience of other remote regions, to suggest we benefit from them doing so.   Without big new natural resource discoveries, remote places –  regions, territories  – in the advanced world  tend to have quite weak population growth rates.  It isn’t obvious why in New Zealand we should let immigration policy up-end that otherwise natural outcome.

Two BIMs and a bureaucrat

As I noted last week, government departments’ (and agencies’) briefings to incoming ministers have mostly become a bit of a joke: mostly devoid of any substance, typically specifically tailored to the preferences of the particular incoming government (ie written/finalised after the shape of the new government is clear), and mostly not much more than process pieces.  If one is interested in the actual substantive advice –  the sort of things the Lange government intended to make available when they began publishing BIMs in the mid 1980s –  citizens need to fall back on the Official Information Act, with all its limitations.

There are exceptions –  I wrote the other day about some substance in the Reserve Bank’s BIM.   And even on the little that is released, sometimes tantalising hints sneak through.  The intelligence services, for example, left unredacted a suggestion that governments might need to be concerned about the influence activities in New Zealand of foreign governments –  something neither the current Prime Minister nor her predecessor have been willing to take seriously or address openly.

Of the other economic functions, neither the Treasury nor the Immigration BIMs say much.  But sometimes there is quite a bit even in a few words.  Take immigration for example.    It was only a few years ago that MBIE was telling Ministers of Immigration (and the public) that immigration was a “critical economic enabler” –  a potential catalyst to transform New Zealand’s dismal productivity performance.   There isn’t much in this year’s Immigration portfolio BIM –  mostly process again –  but my eye lit on this paragraph

New Zealand’s immigration system enables migrants to visit, work, study, invest, and live in New Zealand. Economically, it contributes to filling skill shortages, encouraging investment, enabling and supporting innovation and growing export markets. Immigration has contributed to New Zealand’s strong overall GDP growth in recent years largely through its contribution to population growth. However, the evidence suggests that the contribution of immigration to per capita growth and productivity is likely to be relatively modest.

The theory –  dodgy bits like “filling skill shortages” and the more plausible bits –  is there in the first half of the paragraph.  But by the end of the paragraph, even MBIE has to concede that there isn’t likely to be much boost to per capita income or productivity at all –  the effects are “likely to be relatively modest”.  It is hard to avoid that sort of conclusion –  looking specifically at the New Zealand experience –  when (to take MBIE’s list from the second sentence) “skill shortages” have been a story told in New Zealand for 150 years, business investment has been weak by OECD standards for decades, firms haven’t regarded it as particularly attractive to invest heavily in innovation (again by world standards), and the export share of GDP is now at its lowest since 1976.  Still, it is good to see reality slowing dawning on MBIE.  On my telling, they are still too optimistic, but even on their telling when such a large scale policy intervention seems to produce such modest economic results it might be time for a rethink.

And what about the BIMs prepared by Treasury?   There isn’t much in the main Finance document (lots of process stuff, and plenty of talk of diversity and wellbeing and none on productivity).  There is an appendix specifically aimed to address what Treasury understand to be the new Minister’s priorities, but not much about Treasury’s own view of what needs to be done, or the pressing problems.    If anything, reading Gabs Makhlouf’s covering letter to Grant Robertson one might conclude that Treasury didn’t think there was much to worry about at all.

You are taking up your role at a time when New Zealand’s economy is in a relatively strong position.  There is solid forecast growth, complemented by fiscal surpluses and a strong debt position.  And while international markets still present a number of risks and uncertainties, overall the global economy –  as reflected in the IMF’s recent outlook –  presents opportunities for New Zealand to seize, in particular with Asia’s ongoing growth.

Presumably the Secretary didn’t think it worth emphasising five years of no productivity growth, seventy years of pretty weak productivity growth, shrinking exports as a share of GDP, sky-high house/land prices, pretty weak business investment and so on.  Or even the fact that notwithstanding “Asia’s ongoing growth” –  a story now for more than forty years –  nothing has looked like turning around New Zealand’s continuing gradual economic decline.    And perhaps when you are a temporary immigrant yourself –  as Makhlouf presumably is –  the cumulative (net) loss of a million New Zealanders isn’t something that concerns you?

In their BIM Treasury proudly asserts that “We are the Government’s lead economic and financial adviser”.  Perhaps they hold that formal office, but it is hard to be optimistic about the content of what they might be offering the government.

But Treasury also had some other BIMs for other portfolios they have responsibilities for.  The one I noticed was the Infrastructure one.    Buried in the middle of that document was this observation

Auckland’s ability to absorb growth has been reached. Environmental, housing and transport indicators all reflect a city under increasing pressure. Traditionally, Auckland has been more productive than other regions of New Zealand but, on a per capita basis, this productivity premium has been shrinking over time. Auckland is not performing as well as expected for its size and in comparison to other primary cities around the world.  There are opportunities to increase this productivity but only if supply constraints, especially transport and housing, are resolved.

That key middle sentence –  no hint of which appears in the main Treasury BIM –  could easily have been lifted from one of my various posts on similar lines.    They could have illustrated the point with a chart like this.

akld failure


Appearing in the standalone Infrastructure BIM, Treasury appear to want to blame these poor outcomes largely on infrastructure gaps –  a conclusion which I think is flawed –  but I’m encouraged to see a recognition of the problem in official advice to the Minister of Finance.   It is all a far cry from the rather lightweight celebratory speech Gabs Makhlouf was giving about Auckland’s economy only 18 months ago, which I summed up this way

[it] might all sound fine,  until one starts to look for the evidence.  And there simply isn’t any.  Perhaps 25 years ago it was a plausible hypothesis for how things might work out if only we adopted the sort of policies that have been pursued. But after 25 years surely the Secretary to the Treasury can’t get away with simply repeating the rhetoric, offering no evidence, confronting no contrary indicators, all simply with the caveat that in “the long run” things will be fine and prosperous.  How many more generations does Makhouf think we should wait to see his preferred policies producing this “more prosperous New Zealand in the long run”?

If the Secretary to the Treasury was going to address the economic issues around Auckland, one might have hoped there would be at least passing reference to:

  • New Zealand’s continuing relative economic decline, despite the rapid growth in our largest city,
  • Auckland’s 15 year long relative decline (in GDP per capita), relative to the rest of New Zealand,
  • The contrast between that experience, and the typical experience abroad in which big city GDP per capita has been rising relative to that in the rest of the respective countries,
  • The failure of exports to increase as a share of GDP for 25 years,
  • The fact that few or any major export industries I’m aware of our centred in Auckland (the exception is probably the subsidized export education sector) –  and by “centred” I don’t mean where the corporate head office is, but where the centre of relevant economic activity is.

There is nothing of economic substance on immigration in the main Treasury BIM this year, but perhaps over the next few years Treasury could start thinking harder about whether it really makes sense to be using policy to bring ever more people to one of the most remote corners on earth, even as personal connections and supply chains seem to be becoming ever more important, at least in industries that aren’t simply based on natural resources.

The one other thing that did catch my eye in the Treasury BIM was this paragraph

The Treasury Board. This external advisory group supports the Treasury’s Secretary and ELT to ensure that its organisational strategy, capability and performance make the best possible contribution to the achievement of its goals. Current members of the Board are the Secretary to the Treasury (Gabriel Makhlouf), the Chief Operating Officer (Fiona Ross), Sir Ralph Norris, Whaimutu Dewes, Cathy Quinn, Mark Verbiest, Harlene Hayne and John Fraser (Secretary to the Australian Treasury).

Now, to be fair, the “Treasury Board” has no statutory existence, and no statutory powers.  It isn’t even clear why it exists at all –  Boards are typically supposed to represent shareholders, and as regards Treasury, the Minister of Finance, Parliament, and the SSC are supposed to do that on our behalf.  But given that there is an advisory Board, what is a senior public servant from another country  –  the Secretary to the Australian federal Treasury –  doing on it?      New Zealand and Australia might be two of the closer countries in the world, but we don’t always have the same interests, and at times those interests –  and perspectives – clash rather sharply.    I gather John Fraser is quite highly regarded, but who does he owe allegiance to, and whose interests is he advancing in his work on the New Zealand “Treasury Board”?  I might not worry if he were a retired former Treasury Secretary from Australia, but he is a serving official of the Australian government.  It seems extraordinary, and quite inappropriate.   Did he, for example, have any involvement in the recent, superficially questionable, appointment of a former senior Queensland public servant to a top position in our Treasury?    Again, close working relationships between the two Treasurys –  each as servants of their own governments –  might be reasonably expected, and perhaps mutually beneficial.   But providing a senior official of another government with inside access to the senior-level workings of one of our premier government departments seems questionable at best.  GIven Makhlouf’s past enthusiasm for China, perhaps the appeasers at the New Zealand China Council will soon be suggesting he appoint someone from China’s Ministry of Finance could join Fraser on the “Board”?

And finally, some kudos for a bureaucrat.  As various people have noted, Graeme Wheeler went for five years as Governor –  as the most powerful unelected person in New Zealand –  without ever exposing himself to a searching interview, or making himself available for an interview on either main TV channel’s weekend current affairs shows.  His appointment might be highly legally questionable, he might be only minding the store for a few months, but yesterday Grant Spencer went one better than Wheeler and sat down for interview on Q&A with Corin Dann.    I thought he did well, but what really counted was just showing up, and being open to questions.

Since much of the interview was about Spencer’s speech last week, which I’ve already written about, there was much in it that I disagreed with.  But I’m not going over that ground again.  Perhaps the one new thing that caught my attention was when Spencer claimed that the Bank is independent for monetary policy, but not around things like LVRs.   That is simply factually untrue.  The Act makes it very clear that any decisions to impose or lift LVR restrictions are solely a matter for the Governor (also a point that the Prime Minister, the Minister of Finance and their predecessors have recognised).   Spencer went on to say that if the then government had not wanted the Bank to impose LVR restrictions they wouldn’t have done so.     That might be fine, but I hope they never apply that standard to monetary policy decisions.  And if LVR decisions really are more political and redistributive in nature, perhaps as part of the forthcoming review, the Reserve Bank Act should be changed so that the Reserve Bank offers technical professional advice, but the Minister of Finance makes the decision?.  We can, after all, toss out elected governments.




The new government’s immigration policy

It was confirmed yesterday that the new government’s immigration policy will be the policy the Labour Party campaigned on (albeit very quietly).  And so we learned that the new government will remain a fully signed-up adherent of the same flawed, increasingly misguided, “big New Zealand” approach that has guided immigration policy for at least the last 25 years.

If that is disappointing, it shouldn’t really be any surprise.     The Green Party approach to immigration is pretty open –  the “globalist” strand in their thought apparently outweighing either concern for New Zealand’s natural environment or any sort of hard-headed analysis of the economic costs and benefits to New Zealanders.  Only a few months ago, they were at one with the New Zealand Initiative, tarring as “xenophobic” any serious debate around the appropriate rate of immigration to New Zealand.  Never mind that population growth is driving up carbon and methane emissions, in a country where marginal abatement costs are larger than in other advanced economies, and yet where the same party is determined that New Zealand should reach net zero emissions only 33 years hence.

As for New Zealand First, they talk a good talk.  But that’s it.   As I noted a few months ago, reading the New Zealand First immigration policy (itself very light on specifics)

If one took this page of policy seriously, one could vote for NZ First safe in the expectation that nothing very much would change at all about the broad direction, or scale, of our immigration policy.     Of course, there would be precedent for that.  The last times New Zealand First was part of a government, nothing happened about immigration either.

Even so, I was just slightly surprised that there wasn’t even a token departure from the Labour Party’s immigration policy that New Zealand First could claim credit for.   The New Zealand Initiative’s report on immigration policy earlier in the year was largely (and explicitly) motivated by concerns about what New Zealand First might mean for immigration policy.

Six months ago, when we started scoping the Initiative’s immigration report, we had a very specific audience in mind: Winston Peters. Our aim was to assemble all the available research and have a fact-based conversation with New Zealand’s most prominent immigration sceptic.

Turns out that, perhaps not surprisingly based on the past track record, that they needn’t have bothered.

And so Labour’s election policy will be the immigration policy of the new government.    The policy documents themselves are here and here.   I wrote about the policy here at the time it was released in June, before the Ardern ascendancy.   It was notable how little attention Labour gave to immigration policy during the campaign –  perhaps it didn’t fit easily with the “relentlessly positive” theme –  and I understand there was a conscious decision by the new leadership to downplay the subject.    It will be interesting to see now whether they follow through on their manifesto, but very little about immigration policy requires legislative change so, in principle, the changes should be able to be done quite quickly.  In fact, as the biggest proposed changes affect international students one would assume they will be wanting to have those measures in places in time for the new academic year.

What also remains quite remarkable is the extent to which Labour’s policy has been taken as a substantial change.  Serious overseas media and intelligent commentators have presented Labour’s proposals as some sort of major sustained change in New Zealand approach to immigration, and thus to expected immigrant numbers.    To read some of the Australian and American commentary you might have supposed, say, that in future New Zealand’s immigration approvals might be cut towards, say, the sorts of levels (per capita) that prevailed in the United States under Bush and Obama.

Labour’s policy is, of course, nothing of the sort.  Under the proposed policy, New Zealand will remain –  by international standards –  extraordinarily open to non-citizen migrants, with expected inflows three times (per capita) those of the United States, and exceeded only (among OECD countries) by Israel in a good year (for them).

What determines how many people from abroad get to settle permanently in New Zealand is the residence approvals programme.   Under that programme, at present the aim is to grant around 45000 approvals to non-citizens each year (Australians aren’t subject to visa requirements, but in most years the net inflow of Australians is very small).  The outgoing government reduced that target (from 47500) last year.   Labour’s immigration policy document does not, even once, mention the residence approvals programme.  That was, no doubt, a conscious choice.  They are quite happy with the baseline rate of non-citizen immigration we’ve had for the last 20 years; quite happy to have the highest planned rate of non-citizen immigration anywhere in the OECD.  Medium-term forecasts of the net non-citizen immigration inflow will not change, one iota, if Labour proceeds with their policy.  For some of course, that will be a desirable feature.  For others it is a serious flaw, that results from failing to come to grips with the damage large scale immigration is doing to the economic fortunes of New Zealanders.

Of course, there are planned policy changes.    There are various small things:

  • an increased refugee quota,
  • steps to increase the utilisation of the existing Pacific quotas,
  • more onerous requirements for investor visas (including requiring investment in new “government-issued infrastructure bonds”),
  • a new Exceptional Skills visa,
  • a KiwiBuild visa

Taken together, these won’t affect total numbers to any material extent.

There is also a (welcome) change under which they will

Remove the Skilled Migrant Category bonus points currently gained by studying or working in New Zealand and standardise the age points to 30 for everyone under 45.

All else equal, these changes won’t affect the number of people getting residence, or materially affect the average quality (skill level) of those getting residence.   That is a shame: at present, too many migrants aren’t that skilled at all, and maintaining such a large approvals target (in such a remote, not very prosperous, country) makes it hard to lift the average quality.

The bigger changes are under two headings.    The first is around temporary work visas.   Here is what they say they will do.

Labour will:

• Actively manage the essential skills in demand lists with a view to reducing the number of occupations included on those lists

• Develop regional skill shortage lists in consultation with regional councils and issue visas that require the visa holder to live and work within a region that is relevant to their identified skill

• For jobs outside of skills shortages lists, Labour will ensure visas are only issued when a genuine effort has been made to find Kiwi workers

• Strengthen the labour market test for Essential Skills Work Visas to require employers to have offered rates of pay and working conditions that are at least the market rate

• Require industries with occupations on the Essential Skills in Demand lists to have a plan for training people to have the skills they require developed together with Industry Training Organisations

• Review the accredited employers system to make sure it is operating properly.

The broad direction seems sensible enough –  after all, the rhetoric has been about lifting the average skill level of the people we take.   But as I noted in my comments in June, the policy is notable for its touching faith in the ability of bureaucrats to get things right, juggling and managing skills lists, and now extending that to a regional differentiation.   There is no suggestion, for example, of letting markets work, whether by (as I’ve proposed) imposing a flat (quite high) fee for work visas and then letting the market work out which jobs need temporary immigrant labour, or by requiring evidence that market wages for the skill concerned have already risen quite a lot.  The latter would have seemed an obvious consideration for a party with trade union affiliates.

On Labour’s own estimates, these changes won’t have a large effect on the number of people here on work visas at any one time, although in the year or so after any changes are implemented, the net inflows that year will be lower than they otherwise would have been.

Much the same goes for the biggest area of change Labour is proposing, around international students.

Labour will:

• Continue to issue student visas and associated work rights to international students studying at Level 7 or higher – usually university levels and higher

• Stop issuing student visas for courses below a bachelor’s degree which are not independently assessed by the TEC and NZQA to be of high quality

• Limit the ability to work while studying to international students studying at Bachelor-level or higher. For those below that level, their course will have to have the ability to work approved as part of the course

• Limit the “Post Study Work Visa – Open” after graduating from a course of study in New Zealand to those who have studied at Bachelor-level or higher.

In general, I think these are changes in the right direction.  Here were some of the comments I made earlier

I’m a little uneasy about the line drawn between bachelor’s degree and other lines of study.  It seems to prioritise more academic courses of study over more vocational ones, and while the former will often require a higher level of skill, the potential for the system to be gamed, and for smart tertiary operators to further degrade some of the quality of their (very numerous) bachelor’s degree offerings can’t be ignored.  …… I’d probably have been happier if the right to work while studying had been withdrawn, or more tightly limited, for all courses.   And if open post-study work visas had been restricted to those completing post-graduate qualifications.

The proposals are some mix of protecting foreign students themselves, protecting the reputation of the better bits of our export education industry, and changes in the temporary work visas rules themselves.     In Labour’s telling –  and it seems a plausible story –  the changes are not designed to produce a particular numerical outcome, but to realign the rules in ways that better balance various interests.  The numbers will adjust of course, but that isn’t the primary goal.

Labour estimates that these changes will lower the number of visas granted annually by around 20000.   That is presented, in their documents, as a reduction in annual net migration of around that amount.   But that is true only in a transition, immediately after the changes are introduced.  The stock of people here on such student and related visas will fall, but after the initial transitional period there will be little or no expected change in the net inflow over time (which is as one would expect, since the residence approvals target is the key consideration there).

To see this consider a scenario in which 100000 new short-term visas are issued each year, and all those people stay for a year and a day (just long enough to get into the PLT numbers).  In a typical year, there will then be 100000 new arrivals and 100000 departures.

Now change the rules so that in future only 75000 short-term visas are issued each year.  In the first year, there will be 75000 arrivals and (still) 100000 departures (people whose visas were issued under the old rules and who were already here).  But in the next year, there will be 75000 arrivals and 75000 departures.    Measured net PLT migration will have been 25000 lower than otherwise in the first year, but is not different than otherwise in the years beyond that.

That doesn’t mean the policy changes have no effect.  They will lower the stock of short-term non-citizens working and studying in New Zealand.    They will ease, a little, demand for housing.  In some specific sectors, with lots of short-term immigrant labour, they may ease downward pressures on wages (although in general, immigrants add more to demand than to supply, and that applies to students too).   But it won’t change the expected medium-term migration inflow.

Oh, and the student visa changes will, all else equal, reduce exports

Selling education to foreign students is an export industry, and tighter rules will (on Labour’s own numbers) mean a reduction in the total sales of that industry.   Does that bother me?  No, not really.  When you subsidise an activity you tend to get more of it.  We saw that with subsidies to manufacturing exporters in the 1970s and 80s, and with subsidies to farmers at around the same time.  We see it with film subsidies today.  Export incentives simply distort the economy, and leave us with lower levels of productivity, and wealth/income, than we would otherwise have.   In export education, we haven’t been giving out government cash with the export sales, but the work rights (during study and post-study) and the preferential access to points in applying for residence are subsidies nonetheless.  If the industry can stand on its own feet, with good quality educational offerings pitched at a price the market can stand, then good luck to it.  If not, we shouldn’t be wanting it here any more than we want car assembly plants or TV manufacturing operations here.

I participated in a panel discussion on Radio New Zealand this morning on Labour’s proposed changes.  In that discussion I was surprised to hear Eric Crampton suggest that the changes would put material additional pressure on the finances of universities.    Perhaps, although (a) the changes are explicitly aimed at sub-degree level courses, and (b) to the extent that universities are getting students partly because of the residence points that have been on offer, it is just another form of “corporate welfare” or subsidy that one would typically expect the New Zealand Initiative to oppose.      Whether hidden or explicit, industry subsidies aren’t a desirable feature of economic policy.

Standing back, Labour’s proposal look as though they might make a big difference in only a small number of sectors, notably the lower end of the export education market.  If implemented, they will be likely to temporarily demand housing demand –  perhaps reinforcing the current weakness in the Auckland housing market, along with some of their other proposed legislation (eg the extension of the brightline test and the “healthy homes” bill).   But they aren’t any sort of solution to the house price problem either: after the single year adjustment, population growth projections will be as strong as ever, and in the face of those pressures only fixing the urban land market will solve that problem. Time will tell what Labour’s policy proposals in that area, which have sounded promising, will come to.

Two final thoughts.  One wonders if whatever heat there has been in the immigration issue –  and it didn’t figure hugely in the election –  will fade if the headline numbers start to turn down again anyway.   The net flow  of New Zealanders to Australia has not yet shown signs of picking up –  but it will resume as the Australian labour market recovers.  But in the latest numbers, there has been some sign of a downturn in the net inflow of non-citizens.

PLT non citizen

There is a long way to go to get back to the 11250 a quarter that is roughly consistent with the 45000 residence approvals planned for each year.  But, if sustained, this correction would provide at least some temporary relief on the housing and transport fronts.  As above, Labour’s changes will have a one-off effect on further reducing this net inflow in the next 12 or 18 months, but nothing material beyond that.

And in case this post is seen by the new Minister of Immigration, or that person’s advisers, could I make a case for two things:

  • first, better and more accessible data.  The readily useable migration approvals is published only once a year, with a lag even then of four or five months.  The latest Migration Trends and Outlook was released in November 2016, covering the year to June 2016.  It is inexcusably poor that we do not have this data readily, and easily useable, available monthly, within a few days of the end of the relevant month, and included (for example) as part of Statistics New Zealand’s Infoshare platform.  The monthly PLT data are useful for some things, but if you want a good quality discussion and debate around immigration policy, make the immigration approvals data more easily available.    As a comparison, building permits data is quickly and easily available, reported by SNZ.  Why not migration approvals?
  • second, considering referring the issue of the economics of New Zealand immigration to the Productivity Commission for an inquiry.   Perhaps the current policy, as Labour proposes to amend it, has all the net gains the advocates say it does.  If so, the Productivity Commission could helpfully, and in a non-partisan way, demonstrate that.  But there are still serious issues around New Zealand’s unusually liberal immigration policy, in a country so remote and with such a poor track record in increasing its international trade share.  Whatever the economic merits of immigration in some places, it is by no means sure that large scale immigration here is doing anything to improve the fortunes of most New Zealanders.  It may, in fact, be holding us back, being one part of the story as to why we’ve failed to make any progress in closing the productivity gaps with other advanced economies.  It would seem an obvious topic for the Productivity Commission, and a good way of lifting the quality of the policy debate around this really substantial policy intervention.




Debate debased

On the Herald website yesterday morning, I noticed a headine “As an immigrant, I’m terrified of Winston Peters”.    I ignored it, as clickbait.  But it was still there last night, so out of curiosity I opened the story.   The Herald is, after all, one of the main media outlets in the country, sometimes still approximating a serious newspaper, and immigration policy is one of the issues that, in a New Zealand context, I’ve given a lot of thought to.

With such a florid, emotionally overwrought, headline, I had low expectations of the article.  But I still wasn’t prepared for what I found.    The author, Ben Mack, is described as a “lifestyle columnist” for the Herald.   His previous columns include a, borderline offensive, piece on “18 reasons why New Zealand is like North Korea”.

He’s an American citizen, and despite the headline isn’t really an immigrant at all.   He is apparently here on a temporary work visa, having previously been here on a student visa.   Quite how the economic prospects of New Zealanders would have been impaired by an apparent shortage of New Zeaaland “lifestyle columnists” isn’t clear, but set that to one side for the moment.   Apparently he has hopes of eventually being granted New Zealand residency and staying on.  Many do, but it isn’t an entitlement.  When you go to a country to work on a temporary visa, you might well have to go home again –  I know, I’ve done it three times.   It is up to New Zealanders, and the New Zealand government, to decide how many people, and who, it allows to settle permanently among us.  That’s not unusual.  It is how pretty much every country in the world operates.  I suspect Barack Obama might have been too conservative to Mr Mack’s tastes and preferences, but under the Obama Administration –  as under the present US government –  the United States grants one-third as many residence visas, per capita, as New Zealand does.

But, as a temporary resident in New Zealand, Mr Mack is apparently “terrified” by Winston Peters – a long-serving democratically elected member of a long-established Parliament.   Why?  Well, that isn’t really clear.

His article begins

Winston Peters is gaslighting the entire country. Sound extreme? If anything, I think it’s an understatement, actually.

The Oxford Dictionary defines “gaslighting” as to “manipulate (someone) by psychological means into doubting their own sanity.”

That’s exactly what Mr Peters is doing. And it’s long past time we did something about it.

I’m glad he provided a dictionary definition because I’d never heard of “gaslighting” myself.   I still can’t say I recognise the phenomenon,   And as for “it’s long past time we did something about it”, surely (a) it is called democracy, freedom of expression etc etc –  all that stuff they don’t have in North Korea, and (b) the relevant “we” here is New Zealand citizens and voters (the latter category, even under our unusually liberal law, not including people on temporary work visas).

I get that Winston Peters isn’t everyone’s cup of tea (he isn’t really mine).  In fact, only 7.2 per cent of voters opted for his party.  92.8 per cent didn’t.  That’s almost as many as the 93.7 per cent of voters who didn’t opt for the Green Party.   But, you know, it is democracy.  I’m sure MMP is a strange concept to visiting Americans –  and I’m not a fan of it myself – but it was the freely chosen system adopted by New Zealand voters. If you get 5 per cent of the vote, your party gets seats in Parliament.  Personally, I think the threshold should be lower, but again the rules are the rules and one shouldn’t tamper with them lightly.  New Zealand First has now been around for almost 25 years, and the high point of its electoral support was 1996, when the party got 13.4 per cent of the vote.  And in a proportional representation system –  and such systems are pretty common –  it is rare for a single party to win a majority of seats in Parliament, and in the absence of a taste for “grand coalitions” –  arrangements that undermine the potency of political opposition, a vital part of a parliamentary democracy – that means that at times smallish parties that could readily work with either main party can get to exercise quite a bit of clout.

But –  and here is where a bit of perspective and experience of New Zealand might have come in handy to Mr Mack – not usually that much at all.   New Zealand First was in coalition with National in the mid 1990s –  Winston Peters as Deputy Prime Minister and Treasurer –  and it was in partnership with Labour for a few years from 2005 –  Winston Peters serving a Foreign Minister, and generally accepted as having done a reasonable job.   And what changed?  1996 is a while ago now, but I can recall:

  • a small increase in the inflation target, never subsequently reversed,
  • free doctor’s visits for kids under six, never subsequently reversed, and
  • a referendum on reform of New Zealand Superannuation, in which the cause Peters was advocating lost decisively.

Oh, and I think there was a Population Conference.

The 2005 to 2008 term was even less memorable, unless you were a Ministry of Foreign Affairs bureaucrat: their Minister secured them a great deal of additional money and the prospect of various new embassies.

I’m sure there was other stuff, but none of it was transformative.

Whether New Zealand First never made much difference because of Peters’ own limitation as a government politician or because he was always a minority party and legislation actually requires 61 votes, or some combination of the two, or other reasons altogether is an interesting question.  But even if the opposition bark was in some way genuinely “terrifying”, the track record in office has been such as to not leave much trace.

Mack continues

Let me get this out of the way: I have zero respect for a man who, for decades, has made populist xenophobia his stock-and-trade, and who seems to delight in causing misery for entire groups of people (his abuse of the press – people simply doing their jobs like everyone else – is unacceptable enough).

I’m sure in journalism school they do – or did –  encourage people to use words carefully.   And when young journalists didn’t, grizzled sub-editors did it for them.  But perhaps that discipline no longer exists?    The Oxford dictionary –  Mack’s own source –  defines “xenophobia” as a ‘deep-rooted fear of foreigners’.    Perhaps Peters does have that fear –  I’ve never met the man –  but I doubt Mack could produce any serious evidence for it.  Instead, as with many pro-immigration people –  be it the Greens, or the New Zealand Initiative –  “xenophobia” has become a substitute for “thinking that, just possibly, one of the highest rates of immigration in the world might not always be benefiting New Zealanders”.

And I can’t say I have much time for how Peters handles the media but… is a free country.

Mack continues

What’s worse is his red herring that he’s “looking out for New Zealanders”, trotting out all kinds of nonsense about how us immigrants are supposedly pushing this great nation to breaking point.

He’s ignoring that it’s immigrants who have helped build this country. It’s thanks to immigrants New Zealand punches far above its weight on the international stage than a nation with fewer people than most big cities has a right to.

Actually, I suspect “breaking point” is Mack putting words in Peters’ mouth.   But I really hope that all the politicians we elect –  and those who sought office but missed out –  could comfortably put their hand on their heart (although I guess that is more of an American idiom) and declare that they are, first and foremost, “looking out for New Zealanders”.   A pretty basic expectation surely?  Reasonable –  and unreasonable –  people might differ on what is in our best interests.  That’s the stuff of politics.  But I’m only interested in voting for parties that are interested in pursuing our best interests.   I suspect all of them fit that bill, even if none align very well with what I personally think of as our best interests.

As for the second paragraph in that little excerpt, I have no idea what he’s talking about.  I’m sure that some of those who’ve immigrated to New Zealand in the last 25 years or so –  the current wave of large scale non-citizen migration –  have made a great contribution.  Most will have done well for themselves (if they hadn’t presumably they’d have gone home again), but in what way does Mr Mack think we now “punch above our weight” more than we were doing in 1990 (say)?  In economic terms, we’ve slipped a bit further down the international league tables in that time.  Hundreds of thousands more New Zealanders have left for the better opportunities they find abroad.  Are our universities better ranked internationally? Our media more influential?   Mostly, what has happened is that our population has grown rapidly and that, compounded with our crazy land use laws, have made housing ever more unaffordable.  And New Zealand firms have found it ever harder to compete internationally.

It’s absolutely gaslighting when you look around and have no idea who is infected with New Zealand First’s noxious anti-immigrant extremism: Co-workers, classmates, friends, family, fellow shoppers at the supermarket, the clerk at the post office, the teller at the bank, the bus driver, the usher at the movie theatre …

Oh, no…..ordinary New Zealanders might share some unease about the rate of immigration in New Zealand.  How unacceptable.  Some economists do too.  And here I’m not just talking about myself.  Gareth Morgan-  who seemed to draw his votes mostly from pretty left-liberal places and professional people –  was expressing some unease too.

When you’re an immigrant like I am, you start to get a bit paranoid, wondering who might secretly want to see you forcibly removed from the country you now call home. Believe me, always having to be suspicious is incredibly damaging to your health and quality of life.

When you come on a temporary visa, you have no entitlement to stay. I quite get that worrying that the rules might change could be unsettling.  But elections are like that, not just in respect of immigration but, for example, pension ages, water rights, taxation of capital assets and so on.  Countries –  their citizens and voters –  get to make choices, and every choice has people on the other side of it.

And then the rhetoric rises to new levels of absurdity

It’s even more frightening when people with influence – like Duncan Garner recently – spout the same extremist views as Peters, then bizarrely claim it’s not xenophobic to say things like “immigration is great, but I’m not sure our traditional standard of living is enhanced by it”.

Yeah, nah bro. That’s dog-whistle politics 101. It’s the same kind of thing Hitler and the Nazis said during their rise to power. It’s the same thing the likes of Richard Spencer, Marine Le Pen, Alternative für Deutschland, Alex Jones, Milo Yiannopoulos and others spout with sickening regularity. It’s the kind of hateful rhetoric that has caused real harm.

It’s the kind of hate speech that can get people killed because it can inspire folks to physically attack immigrants.

Lets just state it simply: to prefer a low rate of immigration is not an illegitimate position.  You might think, as I do, that a high rate of immigration to New Zealand has been quite economically damaging to New Zealanders.   You might prefer social cohesion rather than ever-increasing cultural diversity.  You might just prefer to live in a small, sparsely-settled country.  Or you might just fear that politicians will never sort out of the housing market and the only way your kids will get a foothold, under say age 60, is if the population pressures (all policy-induced) are ended.   They are all arguable views –  some about evidence, some just about preferences.  They are conversations societies need to be able to have among themselves, in a mutally respectful way.    As a reminder, there is only one OECD country that actively aspires to take more immigrants than New Zealand does –  and that is Israel, where the door is open to all (but only those) who share the Jewish faith and ancestry.  The New Zealand status quo is exceptional, not normal.  Perhaps it benefits most New Zealanders –  I doubt it –  but that is the issue that should be able to be debated.

Mack continues

You’ve heard it before, but it’s worth repeating again: many immigrants sacrifice literally everything to come to New Zealand for a better life. I am one of them. In coming here, I gave up a well-paying job with serious potential for career advancement at one of the largest news organisations in Europe (an organisation which took a chance on hiring me when I had a woefully skint resume and didn’t speak a word of German at the time).

I had a nice apartment in Berlin, enjoyed the luxuries of living on a continent where I could take a one-hour flight for as little as $30 to experience a completely new culture, and had close friendships with people I’ll never forget (all the more important when you’re like me and struggle with making friends).

To which my reaction is mostly “And……?”     Yes, moving continents on a temporary work visas is a risk.  Plenty of things in life are.  And if you find it difficult to make new friends, sometimes staying at home makes sense.  Recall, that Mack comes from a far richer country than New Zealand, and if by some chance he doesn’t end up getting residence –  something he has no entitlement to –  it isn’t clear why that is our problem.

What truly makes my blood run cold is now Peters has power. Make no mistake: Peters being “kingmaker” is the worst thing to happen to this country in modern times.

I am not exaggerating.

Yes you are.  See 1996 and 2008.    (And personally, I worry a lot more about politicians of all parties who for 25 years, after each election, have done nothing to reverse our slow relative economic decline.)

And he ends – after rants at the unfitness of office of the Prime Minister and Leader of the Opposition

A change in mindset is well overdue. When we watched the 2016 US presidential election with open-mouthed shock, many felt that such a thing could never happen here, that at least a dangerous figure like Trump could never gain power in the Land of the Long White Cloud. Guess what: it’s happened.

We need to galvanise our outrage and fear into action. As much as we might like to, we can’t ignore someone like Peters. His Trumpian style of bigoted nationalism is here, now. Instead, he must be repudiated at every turn. On panels. At press conferences. At political gatherings. At workplaces. At schools. Around dinner tables. Online. Everywhere.

If New Zealand wants to have a prosperous, less hateful future, it’s time to step up, now.

The lives of thousands of people truly depend on it.

The question is: what side of history do you want to be on?

I guess he’s new to the country, a temporary resident at this stage, but has he encountered the difference between a single decision-maker system (all executive authority in the US is vested in the President) and a system of Cabinet government?  In whichever government emerges in the next week or so, members of the National Party or the Labour Party will hold either a majority of the positions, or all the positions.  Perhaps Mr Mack could devote his political energies to securing change in his own country, where he is presumably entitled to vote.

What isn’t clear in any of this is what, specifically, in New Zealand First immigration policy Mr Mack objects to.   I’ve written about it previously, drawing attention to the lack of any real specificity, and the lack of any real change to immigration policy when New Zealand First was part of government.  Personally, I count that as a flaw, but it might be a reason for Mr Mack to consider toning down his hyperventilated rhetoric.   At best –  from the perspective of someone who thinks our immigration policy is much too liberal, whether the immigrants come from Ontario, Oregon, Bangalore, Beijing, Buenos Aires or Birmingham –  we might end up with a system that reduced the average inflow to around the per capita rates Barack Obama was presiding over, in turn more liberal than the systems of many other advanced countries.  But I doubt anything like that will happen, and New Zealand will continue its slow relative decline.  Probably it will always be a nice place to live –  if very remote.  And while I’m not a fan of “what side of history do you want to be on” arguments, I’d prefer to vote for someone –  if there were such a candidate –  who was going to offer a serious prospect of reversing 70 years of relative economic decline for New Zealanders, and on building on the strengths that once made New Zealand one of the very richest and most successful nations on earth.

You might wonder why I bothered devoting so much space to Mr Mack.  His views aren’t, in themselves, very important or, apparently, grounded in much understanding of New Zealand economic history or cross-country comparative experiences.    But his column was published by one of our leading media outlets –  supposedly more than just a portal for any view anyone wants to express.  And it is inconceivable that the same outlet would publish anything so overwrought from someone on the other side of the issue  (  and nor would I encourage them to do so).  It is just the sort of contribution the New Zealand debate doesn’t need.  But, of course, the strong suggestion in Mr Mack’s column is that he isn’t interested in debate, or dialogue…..instead disagreement, in his view, should invite ostracism.

There was a much better piece on The Spinoff last week from Jess Berentson-Shaw of the Morgan Foundation, encouraging serious debate and dialogue on immigration policy issues.   I don’t agree with all of what she has to say – indeed, I suspect that when we got to the details of specific policies we might not agree on much at all –  but it is a much more constructive, eirenic, approach to thinking about how a civilised society can grapple with complex and multi-dimensional issues, in this case immigration.  She was prompted  by the faux furore over Duncan Garner’s recent column

Discussing what we value and what matters in immigration will help. Having a decent framework for the issues that matter is a really good start, so let’s continue along this constructive track. I want to buy my undercrackers in a tolerant society that can talk more reasonably about this stuff.

I might come back to some of his specifics, and her links to a brief paper by Peter Wilson and Julie Fry on a possible framework for evaluating immigration policy.

And finally, when I was responding to David Hall last week –  who objected to any suggestion immigration policy and emissions reduction policy should be linked in New Zealand –  I went back to read his introduction in the BWB Texts book Fair Borders.    Having read that introduction several times, I’m still not quite clear what specific immigration policy he would favour for New Zealand.  But I was struck by this brief comment

To echo an argument by migration scholar Alan Gamlen, if we cannot justify our migration policy while looking into the eyes of those it affects, we need to think again.

And, actually, I agree totally.  But I wonder who doesn’t?  (And actually the same comment could be made for all areas of policy.)   There are many people who are at least emotionally sympathetic to an open borders approach who seem unable to conceive that there might be reasoned, moral, and defensible arguments for –  following the practice of all states –  and putting limits on who might come and settle among us.  But I also suspect that in Hall’s quite “the eyes of those it affects” doesn’t include the New Zealanders who are already here.  Economic prosperity and stable ordered societies aren’t mostly a matter of luck, but of consistent discipline and hard work over centuries.  Successful societies need to guard what they’ve built –  not in some in insular sense, closed to outside ideas, or even in some sense of “our wealth is at the expense of your poverty” (it just isn’t) – but because what is hard- and painstakingly built can be too easily corroded, put at risk, and eventually destroyed.    They are particularly important economic considerations for an extremely remote nation with few obvious economic opportunities, which has already been in relative economic decline for 70 years.




An alternative perspective on emissions and immigration

I’ve now got off my chest my annoyance at some of the “playing distraction” rhetoric David Hall used in his Newsroom piece responding to my column urging that the Productivity Commission inquiry into a transition to a low-emissions economy should at least consider the potential role of immigration (in boosting emissions in the past, and perhaps in offering a lower-cost abatement tool in future). But I wanted to come back to some of the more substantive issues Hall raises.

Bear in mind that my column was based on a submission to the inquiry the government asked the Productivity Commission to undertake.  The terms of reference which the Commission is operating under are focused on New Zealand’s own policy responses, and how to (maximise the benefits and) minimise the costs of meeting the target which the government has set.    The focus is –  rightly in my view – on national interests (costs and benefits to New Zealanders) now that the New Zealand government has already factored in its response to the (actual and perceived) global imperatives, in establishing an emissions reduction target under the Paris climate agreement.    Having determined how much reduction in emissions we will aim for, and made those commitments to other countries in an international context, the challenge now is how best to adjust, and what mix of policy instruments might enable us to deliver on those commitments.

Hall argues that “what matters from the perspective of Earth’s atmosphere is what people emit, not where they emit it”.  Maybe so, but the New Zealand government is not now making policy for the “Earth’s atmosphere”, but around an emissions reduction target it has signed up to for New Zealand.  In that context, where the emissions happen matters.

My submission was firmly set within that sort of framework –  one set by the government and recognised by the Commission.  In fact, in the Terms of Reference the three ministers were using exactly the same sort of analytical framework I was.

New Zealand’s domestic response to climate change is, and will be in the future, fundamentally shaped by its position as a small, globally connected and trade-dependent country.  New Zealand’s response also needs to reflect such features as its hjgh level of emissions from agriculture, its abundant forestry resources, and its largely decarbonised electricity sector, as well as any future demographic changes (including immigration).

The focus of my submission was, in many respects, that the Commission had simply ignored that last phrase.  Population growth matters to emissions, all else being equal, and in New Zealand –  where non-citizen immigration is so (a) important, and (b) fully within government control –  population growth can, via immigration policy, and should be considered as an instrument to reduce emissions.    It might be uncomfortable for MBIE (champions of immigration), or for the Ministry for the Environment, but the point of Productivity Commission inquiries isn’t to make life comfortable for established interests.

Hall is clearly uncomfortable with the idea –  the pretty basic fact –  that increased populations increase emissions, all else equal.   But again, discomfort doesn’t change the stylised facts.  As he acknowledges, “road transport emissions have increased by 78 per cent since 1990”, but…..

But the fault here lies with New Zealand’s over-reliance on private vehicles. Migrants (and citizens) contribute to road traffic by necessity, because alternative means of transport are less available, indeed far less so than many migrants are used to, coming from places where travel by trains, trams, cycles and footpaths is not unusual. If low-carbon alternatives in places like Auckland were more serviceable, migrants would doubtlessly utilise them, as indeed would citizens. And if the excuse for underinvestment is the lack of markets of sufficient scale, then population increase and cultural change will drive progress.

In other words, if governments and people did things differently than they actually did, emissions would have been lower.  No doubt, but that isn’t really the point.   Each of the alternatives Hall proposes would have had both public and private costs –  and the point of the exercise is to keep those costs to a minimum.  Perhaps he’d prefer a world of light rail and trains.  Most citizens don’t seem to, at least when confronted with real world costs –  and the economics of such proposals in New Zealand is generally shocking.    Actual transport emissions would have been a lot lower than they are now if, at the extreme, the population had been constant since 1990.  And if –  and it is a proposition for debate –  the immigration that so substantially boosted the population had few, no, or even negative productivity gains for New Zealanders, those emissions reductions could have been achieved at little or no economic cost at all.    There are plenty of ways to reduce emissions, but the challenge is to find the most cost-effective ones or –  in markets –  to set up the instruments in a way that allows private agents to identify the most cost-effective means of adjustment.

In my column and submission I had noted that it is generally accepted that New Zealand typically faces quite high marginal abatement costs to reduce emissions, relative to those faced by most other advanced economies.  When I wrote that, I wasn’t even thinking of it as a controversial proposition.  But Hall wasn’t happy with the claim.

This contradicts Reddell’s claim that “all informed observers recognise that the marginal abatement costs in New Zealand, through conventional means, are high”. I’ve written for Pure Advantage about the potential of forests – both production and permanent forests – to offset agricultural emissions in a way that isn’t only cost-effective but potentially profitable. This is corroborated by other “informed observers”, such as the Royal Society of New Zealand, the Parliamentary Commissioner for the Environment and Vivid Economics. The latter’s Net Zero in New Zealand report highlights other low-cost opportunities in energy efficiency, heating technologies, agricultural efficiency, and technological advances in methane vaccines and cheaper electric vehicles.

I’m happy to alter “all informed observers” to “most observers”, but I’m not resiling from the basic point.   Warwick McKibbin of ANU, who has done a lot of modelling on climate change and emissions abatement first produced estimates 20 years ago showing that that the “marginal abatement cost in New Zealand amongst the highest in the world”.  I’ve heard him repeat the point in various seminars and lectures over the years.    Why are the costs higher here?  Among other things, because a very large chunk of our emissions are agricultural, and there aren’t yet good technologies for reducing the emissions while keeping the animals.  And because our power generation is already largely hydro-based, so can’t easily be switched to alternative fuels to reduce carbon emissions.   This is an expensive place to reduce emissions –  an equal marginal cost approach would see us adopt a less aggressive emissions reduction target than most countries.    There are papers on the web from government agencies making exactly this point.

The Productivity Commission themselves recognise these points. For example, from their issues paper, on animal emissions.

Moderate emissions cuts are possible from certain agricultural technologies (eg, low-emission feds). However, a low-cost technology that delivers dramatic reductions in biological emissions appears far off, and may not emerge. While a methane vaccine could reduce CH4 emissions by up to 40%, no successful trials of such a vaccine have so far occurred.

Actually, for all the talk of alternative technologies, the Vivid Economics paper Hall links to makes much the same point about the sorts of constraints New Zealand faces.  Here is text from the Executive Summary (of a report funded by various MPS, foreign embassies and other donors).

In meeting this challenge, New Zealand is distinctive in at least three respects: its significantly decarbonised energy sector; its large share of difficult-to-reduce land sector emissions; and its large forestry sector. Elsewhere in the world, more focus has been devoted to reducing emissions from the electricity sector than from any other sector. Huge efforts and costs are now beginning to translate into progress. But for New Zealand, these challenges are of less significance. Its power sector consists primarily of hydroelectric and geothermal resources, providing firm, reliable capacity. Even with the challenge of decarbonising other parts of the energy sector (transport fuels, heat), the resulting relatively low-carbon energy mix provides the country with a considerable competitive advantage in a world that is placing increasing constraints on emissions. Yet, at the same time, the importance of the pastoral agriculture sector to the economy and social fabric of the country creates a huge challenge, although one that is laced with opportunity. Biological emissions from agriculture account for almost half of New Zealand’s gross emissions, a higher proportion than in any other developed country. While other developed countries may choose to not prioritise reducing these emissions in the short term, following suit would have important repercussions for New Zealand in meeting future targets.

Wishing it were otherwise does not make it so.  Marginal abatement costs are typically higher here than in other countries.  Those costs may well be falling –  as eg new battery technologies for example open up new options re transport emissions –  but those technologies are available to other countries too. They don’t change the specific challenges New Zealand faces relative to other advanced countries.   The emissions target we’ve committed to, whether through belief or interest, represent a new constraint on economic performance, and that constraint is more severe for New Zealand than for most, in a country with a long-term history of real economic underperformance.

Against that backdrop it would be irresponsible to simply wave our hands and pretend that immigration isn’t an issue (for us, as New Zealand, and our governments), ploughing on oblivious to the potential real economic costs of doing so.     Immigration policy needs to be considered as one strand in thinking about how best to design a New Zealand policy response, to minimise the net adjustment costs to New Zealanders.

I’d simply taken for granted what seemed like a fairly obvious point (even Hall reluctantly acknowledged it) that increased populations will have tended to increase emissions, all else equal. But until now I hadn’t had a look at the cross-country data to see if the relationship was actually there in the data.  It might not have been –  after all, countries might have responded to the rising populations by finding techniques and market instruments to lower per capita emissions sufficiently that there was no relationship left in the observed data.

Fortunately, we have quite detailed data on gross emissions for almost all OECD countries from 1990 to 2015.  In a few cases, the data are only up to 2013 or 2014, and in all the scatter plots that follow I’ve lined up the population changes with the emissons data (eg if for a country there is emissions data for 1990 to 2014, I’ve used percentage population change over that period).  But for 30 countries there is full data for all the variables I looked at.

None of these relationships are particularly tight –  these are simple bivariate relationships, and lots else was going on in each of these countries (eg in the former Soviet bloc countries, production processes had been extremely inefficiently energy-intensive).

I start with transport emissions (actually to 2015 despite the label). As Hall noted, transport emissions in New Zealand have increased a lot, as has our population.

transport emissions

Unsurprisingly, the relationship is upward sloping.

What about manufacturing and construction emissions?

manuf emissions

(That outlier up the top is Korea, which has still been massively industrialising.)

Total gross emissions?

total emissions

Hall seemed particularly perplexed, or perhaps outraged, by my points about agriculture

As I understand him, he argues that New Zealand’s high living standards depend upon dairy exports, which makes it politically infeasible to impose costs for environmental damages. The greater the population, the greater this reliance upon the dairy sector, and so the greater the reluctance to make polluters pay.

Again it seemed pretty descriptively accurate to me (whether it is an outcome he –  or I –  like or not). But even though agricultural emissions are much more of an issue for New Zealand than for most OECD countries, I was curious as to whether there was a relationship (across countries) between population growth and growth in agricultural emissions.  I didn’t have a prior expectation, but in fact this is what I found.

ag emissions

It is actually one of the tighter relationships, so I’ll repeat the proposition from my submission/column: with fewer people it seems quite plausible that we’d have had (tighter environmental regulation and) fewer cows and fewer emissions.

I could go on showing you charts all day, but I won’t try your patience.   Somewhat to my surprise there is actually even a (weak) positive relationship between population growth and per capita emissions and emissions per unit of GDP.  I’m not quite sure why that would be, although in New Zealand (and Australia’s) case, the migrants are moving to some of the OECD countries with, already, the highest emissions per capita and per unit of GDP.

The bottom line for New Zealand is that our immigration policy, which has very substantially boosted our population, has also substantially boosted our emissions over the last 25 years.   Our experience doesn’t look out of line with that of the rest of the OECD: growing populations are associated with more emissions, whether in transport, agriculture or just in total.   Given that marginal abatement costs, even if falling, are still high here relative to those in other advanced countries, it would frankly be irresponsible for any government, concerned primarily about the interests of New Zealanders, not to have the levers of immigration policy considered when assessing the best approach for New Zealand to take to meet its commitments.   The Productivity Commission should be doing so.

In the end, though, I suspect that the real difference between me and David Hall isn’t about any of these numbers.   He concluded his article

Because when it comes to global warming, it’s the carbon intensive economy, stupid. The only genuine solution is to transform the world’s high-emissions economies into low-emissions economies, so that anyone entering them by way of birth or migration can lead a prosperous low-carbon life. Our national emissions targets are a means to this global end. Focusing on peripheral issues like migration only distracts from the work that needs to be done. But that’s what happens when you tell the story of a global problem through a nationalist lens.

But all policy is national, and there is (fortunately) no supra-national government.  We’ve played our part in the international process with our emissions reduction commitments, which are ambitious given the high marginal abatement costs here.  But Hall’s approach suggests he doesn’t really care if there are cheaper, less costly, ways for New Zealand to meet its commitments, and thus reduce costs to New Zealanders (residents and voters); what he cares about is the global.  It is certainly one perspective, but it isn’t the one the government used in setting up the Productivity Commission inquiry.  In practice, it almost certainly isn’t the one New Zealand residents and voters will be using in assessing how governments handle these issues over the next 20 years and beyond.

My own column ended this way

The aim of a successful adjustment to a low-emissions economy is not to don a hair shirt and “feel the pain”. It isn’t to signal our virtue either. Rather, the aim should be to make the adjustment with as small a net economic cost to New Zealanders – as small a drain on our future material living standards – as possible. Lowering the immigration target looks like an instrument that needs to be seriously considered –  including by the Productivity Commission – if that goal is to be successfully pursued.

I’m probably less idealistic than David Hall. Perhaps 30 years as a bureaucrat does that to one.  But in responding to a comment on my earlier post today I noted

My take is that, as a high cost abater, we should impose as little cost on NZers as possible to be seen by friends and trading partners to be making our token contribution (because obviously in global terms it is only token).

Giving serious consideration to cutting our (unusually large) immigration targets looks as though it  should be good economic policy and good (national) emissions-reduction policy.