There is an extraordinary column in the Herald this morning, by their excellent Kate MacNamara (complete with nice biblical allusions in the online version headlines, which may be lost on a younger generation of readers) on the travails of the Productivity Commission. If you can get access, and you care at all about economic policy and institutions in this country, you really should read it.

The Productivity Commission was set up a decade or so ago by the previous government. Inspired by the Australian Productivity Commission – which has done some good work over several decades – there were both cynical and genuine motivations behind it. On the cynical side, it was a cheap win for ACT (this was during the 2008 to 2011 term), and it offset the premature termination of the 2025 Taskforce. But on the more serious side, there was a recognition of the long-running New Zealand productivity failures, and a genuine recognition of the contribution of the Australian commission. There was, of course, no willingness by either the previous government or the current one to do anything serious about productivity-enhancing reform, but perhaps a small fairly inexpensive Commission might come up with some useful nuggets.

One can debate what value the Commission added in its first decade (a mixed bag on my telling), but this story starts 18 months or so ago when the government appointed Ganesh Nana as the new chair. Things seem to have gone dramatically downhill from there, and article reports several waves of staff departures, as well as reminding us of the departure of two commissioners (so bad has the government’s handling got, that one commissioner has had to agree to stay on a bit just so that the Commission has a quorum). Independent HR consultants had been hired (MacNamara got their report) and she has various staff (former and, quite probably, current) speaking to her. The Productivity Commission (PC) is a small organisation, and must be an even more unhappy place this morning.

Nana was clearly appointed by the Minister of Finance to bring a quite different ideological (charitably, analytical) approach to the Commission, but surely even Robertson must be surprised at how poorly Nana has handled the transition from running his own consultancy, to leading an established public sector agency. Some cynics reckon the intention all along was to gut the Commission. Perhaps, but state-funded commissions producing ideologically sympathetic – but perhaps good quality – reports have value to political parties, and it seems they probably aren’t even getting that. Instead, following on from the systematic degradation of the capability of the Reserve Bank, Robertson now seems to have done it to the Productivity Commission as well. Both have the hallmarks of a man who openly says he went into politics to be not Roger Douglas, and who really cares barely at all for the longer-term capability of our economic agencies, let alone the longer-term performance of the New Zealand economy.

But the main reason for this post was that I got mentioned in the article, in a way that may read a little unfairly to Nana (of whom I have been consistently critical since he was appointed, and whom I do not think is fit to hold that particular office). The context was the recent immigration inquiry.

First, it should be noted that the Productivity Commission, as is usual, invited submissions from anyone on both their issues paper and their draft report. I did not make a submission in the first round (although I did make a fairly short submission on the draft report) and, as far as I can recall, neither Eric nor the New Zealand Initiative made submissions at all. I did not make an initial submission for two reasons: first, that my views had long been on the record (and I knew Commission staff were aware of papers/speeches) but also because I had little trust in the willingness or ability of the Commission to grapple seriously with the analytics of the New Zealand experience with large scale policy-led immigration. Among other things, several years earlier Nana had openly championed a “big New Zealand” model in an RNZ discussion we had both participated in.

However, over the course of last year there were several interactions. In June, Commission staff invited me in to articulate my story (which had been outlined again in a recent speech) and to offer any perspectives on the Issues Paper they had released. I had a session at the Commission on 8 July where I noted (my diary)

…to my slight discomfort [given my past open criticism of him] even Ganesh turned up.   Seemed to go quite well – Bill Rosenberg in particular quite tantalised – and I think I at least got them to the view that some sort of cross-country and historical analysis will be needed to do the job even remotely well.

I followed up the meeting by sending them a series of further observations, links to posts etc.

Several weeks later I had this unprompted email from a senior Commission staffer, cc’ed to the inquiry director

I wasn’t keen, for various reasons

Despite my expressed reluctance, Commission staff pursued the matter, and I had a phone discussion with Geoff Lewis. My diary records

Talked to Geoff Lewis about the paper the PC want me to write. I’m not keen –  don’t think it would work for them or me (or my cause) – but Geoff has gone to sound out Graham Scott [former Commissioner] & might see if they can get parallel papers from Eric and me –  which could work.

I don’t have records of this, but memory suggests it being mentioned at some point that Scott had shared my doubts. I don’t know whether staff ever approached Eric, but as you can see I was never keen, and frankly had I been Ganesh Nana I probably wouldn’t have been keen either. (Note that the views of both Eric and I on New Zealand immigration policy and economic performance were already well-documented in various references, speeches etc, including a couple in which we had shared a platform.)

But that wasn’t the end of my engagement with the Commission (staff or commissioners).

And we had that session on 1 October. From memory all the Commissioners attended, and most of the Commission staff. Arthur Grimes is pretty open about his general sympathy for an open-borders approach, and a big believer in large scale immigration to New Zealand (telling the Commissioners that the big gain from immigration was the higher house prices existing New Zealanders got to sell their houses at). Despite our vast differences on the wider issue, Arthur and I combined to strongly disagree with the suggestion the Commission was floating for trying to calibrate the non-NZ citizen inflow to changes in the net flow of NZ citizens. It was a simply unworkable scheme, even if in principle it had had any substantive merit (which I suspect neither of us thought it did).

I concluded my diary comments observing that

But the real problem is that not really any of the Commission people had a strong macro orientation and so much of the discussion appeared ill-anchored (and often not that aware of other experiences etc etc),

Ganesh Nana’s own comments and observations was particularly superficial. Staff seem to have had good intentions, but not necessarily the capability, and the Commission as a whole seems not to have been willing to hire or contract relevant expertise

Obviously I cannot speak to what was going on inside the Commission’s four walls, but I will give Nana credit for having turned up to both meetings.

The Commission’s draft report was released in November. It was a dog’s breakfast, and thus suggestive of real tensions with the Commission. I wrote about the draft here under the heading “Productivity Commission at sea”.

In a background paper there was a reasonable discussion of aspects of what has become known as “the Reddell hypothesis”, but you would hardly have known it from the main draft report

As for the “Reddell hypothesis” itself , the Commission says

At this stage of its inquiry, the Commission is not taking a definite view on the Reddell story

Which, I suppose, is a legitimate stance for them to take, but there is nothing much in the report even indicating where their key uncertainties are, let alone a provisional overall interpretation that submitters could scrutinise and review. I don’t suppose that will seem very satisfactory to anyone, from any side of the debate, considering making a submission. It speaks of a Commission that just has not exercised the intellectual grunt to critically analyse, assess, research and review conflicting arguments and interpretations.

There seemed to be both weaknesses in analytical grunt, and the likelihood of disagreements within the Commission, and yet there was no sign of any serious effort to get to the bottom of the issues. It might have been an entirely reasonable conclusion, having thought hard about the New Zealand experience (past and present, abstractly and in light of literature of other countries’ experiences), that they could show that large scale immigration had in fact produced substantial economic gains for New Zealanders. Or to have become persuaded by something akin to my story. But they never showed any sustained sign of making the effort, either way.

I did make a submission at this point (link in this post), partly for the record and partly to back up a couple of other submitters (one of whom was running more or less my story).

In many respects, the final report was even worse than the draft. It was more or less devoid of any serious analysis of the economic implications of New Zealand’s experience with large scale policy-led non-citizen immigration. Even for those of a serious analytical bent who basically like something like the pre-Covid status quo, it can’t have been at all satisfactory – making no attempt to do anything more than offering up quite glib lines about there being small economic benefits from the New Zealand policy approach. Understanding was not advanced one jot – fallacious stories (whether mine or the policy-establishments) are not shown to be wrong, true stories (whichever) have no serious evidence advanced, or fresh analysis undertaken to strength our confidence in those stories.

It was, in the words of a former Treasury deputy chief economist (not at all sympathetic to my specific story) on Twitter the other day, the sort of thing one might easily have gotten an MBIE policy team to churn out: a few charts, a few bromides, a few minor bureaucratic recommendations, and no real added value – from an independent Productivity Commission – at all. Whether one is inclined to agree with their prejudices or not.

For me, it was perhaps summed up in a lunchtime seminar a couple of weeks back organised by Motu on the Commission’s report. The speakers/panellists were all pretty keen on large scale immigration to New Zealand, but what really caught my ear was Nana who (a) wanted to take politics out of immigration policy (what planet is he on, for such a significant structural policy choice) and (b) describing any doubts about a large scale policy-led migration to New Zealand could only sneer that any scepticism reflected a concern about “nasty migrants”.

And that sort of summed up a deeply inadequate inquiry from a seriously inadequate Commission.

The Productivity Commission should simply be wound up. It adds no obvious value and can never have the institutional depth and specialisation of the Australian version. It isn’t obvious that either Labour or National want serious rigorous in-depth economic analysis and research, but if they do we might as well concentrate public sector resources at The Treasury, who are supposed to be the government’s main advisers on such things.

In the meantime, you wonder which left-wing economists the government will eventually persuade to take on a Commissioner role, especially under Nana.

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.

Were I writing yesterday’s post now I would word some things differently. Yesterday afternoon the Productivity Commission drew my attention to their supplementary paper called “The wider wellbeing effects of immigration” which – despite the title – turns out to be mainly about core economic dimensions of the issue, including a substantive discussion of some of the macroeconomic arguments I have been making. Strangely, there had been no cross-referencing to this document in the parts of the body of the main report where, as discussed yesterday, these issues were briefly discussed. I had seen an earlier draft of the macroeconomic bit of this supplementary paper and had provided some comments on it to the Commission.

Awareness of that supplementary paper does not change my main concern about the overall draft report. There is still little or no compelling analysis or insight on any of wider economic issues, no arguments or evidence or reasoning that anyone serious (on either side of the debate or in the middle) is likely to look back to in future and suggest that they saw things a bit differently as a result. There is quite a lot of description but not much in the way of serious evaluation or critique. And this for one of the largest economic policy interventions the New Zealand government undertakes.

But it now flows into a bigger concern that the Commission – despite months of work – really does not know what it thinks, and thus was reduced to highlighting a bunch of second or third order issues. Recall their own summary of their recommendations

I had thought the Commission was largely endorsing the pre-Covid high (non-citizen) immigration status. I reread the main report last night in the light of the “Wider Wellbeing” paper, and I still reckon that is where their heart is. And that is hardly surprising when the chairman of the Commission had been on record as a vocal champion of using policy to create an ever-bigger New Zealand, and had for years run a story in which monetary policy was the main culprit in any sustained economic underperformance. And thus, as I noted yesterday, in one of their supplementary papers they rely on some modelling done back in 2009 by the chairman’s firm (BERL) which has been touted by some (including ministers in the previous government) as demonstrating the wider economic gains from New Zealand immigration – even though the modelling both assumes away some of the questions required to be answered (the response of business investment), is structured to impose on the model no productivity gains (or losses), and where any gains that do flow (in aggregate) flow entirely to the migrants themselves.

But then in the “wider wellbeing paper” at the end of the macroeconomics chapter we find these “findings”

I wouldn’t frame things quite that way myself, but it is interesting that the Commission chooses to do so. You wouldn’t know of anything like this if you just read the Summary (as probably most politicians will only do) or even get much of a hint of it in the main draft report itself. There is no attempt to reconcile it with other material or arguments they cite (including that 2009 paper by the chairman). They might be right or they might be wrong, but the answer should matter materially. Just prior to these “findings” we find this

So, continuing with high immigration has a potentially costly regret whereas (whether the Reddell hypothesis is correct or not), it has no offsetting large benefit. Cutting back on migration will cause short-term disruption to some businesses and loss of small benefits but no large regret even if the Reddell hypothesis is incorrect. In the latter case, a small benefit would be discovering that Reddell’s hypothesis does not hold the answer to New Zealand’s productivity problems. As Fry concludes:
…least regrets suggests that at some point, there may be value in risking the seemingly small benefits from existing immigration targets in order to determine whether larger benefits may be obtained via reduced interest and exchange rates following the adoption of a lower immigration target. (Fry, 2014, p. 26)

That first sentence is quite strong language. It would be news to at least some champions of the policy pursued here over the last few decades. But again it is hardly hinted at in the main report, let alone those higher profile summary documents.

As for the “Reddell hypothesis” itself , the Commission says

At this stage of its inquiry, the Commission is not taking a definite view on the Reddell story

Which, I suppose, is a legitimate stance for them to take, but there is nothing much in the report even indicating where their key uncertainties are, let alone a provisional overall interpretation that submitters could scrutinise and review. I don’t suppose that will seem very satisfactory to anyone, from any side of the debate, considering making a submission. It speaks of a Commission that just has not exercised the intellectual grunt to critically analyse, assess, research and review conflicting arguments and interpretations.

And when they have made the odd tilt in that direction, they seem to end up confused. Again, rereading the papers last night – and recalling some of the discussions I’ve had with them – it is clear that they are quite exercised by problems/delays in building “public infrastructure” and housing. And there are probably – well almost certainly – reasonable points to be made there, even if most of those issues could be addressed directly and thus do not necessarily have connections to immigration policy (although perhaps in a second or third best sense they might).

But they seem to have conflated those issues with the real resource pressure arguments I have been making, even though the two arguments have quite different implications.

Why do I say that? Well, straight after that line above about the “Reddell story” follows this sentence

For example, it notes that policies to improve housing and infrastructure supply and to invest in them prior
to migrants arriving, could do much to avoid the problems of ongoing excess demand in those areas.

(There is something of a similar, unjustified, flow in the main report too).

And I’m just shaking my head and going “no, no, no” to that. I’m all for freeing up land use (especially on the outskirts of our existing urban areas), properly corporatising water services, building promptly roads etc (that pass credible cost-benefit tests) but – all else equal, and on the Commission’s own arguments – these reforms would boost investment spending. But at the heart of the bit of my story which they seem to take most seriously is the simple proposition – from Stage 2 macro really – that real interest rates in an economy are largely determined by the adjustments required to reconcile ex ante desired investment and desired saving. Getting more houses built might well ease house price pressures – itself generally a good thing – but there is no reason to suppose it will do anything positive about lifting New Zealand private business investment, expanding the tradables sector, or lifting economywide productivity. If anything, the risk is that the effect would run a little in the other direction.

Perhaps there will be more analysis in the final report, including looking at the insights we might gain from a careful comparison of our experiences with those of other countries (including the handful of other high-immigration advanced economies). What, for example, does the Commission make of the cross-country evidence that rapid population growth over decades – and ours is mostly now the result of immigration policy – is associated with a larger share of GDP being devoted to housebuilding (naturally and as one would expect) but not with any commensurate lift in the share of GDP devoted to the business investment required to support ongoing growth in productivity and incomes? And so on. But shouldn’t we have been able to have expected a more developed, and robust, story by the time the Commission was publishing several hundred pages of draft reports, not just when the final report lands on the desks of ministers?

Mightn’t we, for example, have hoped to see compare and contrast of the view (with which I largely agree) that high levels of immigration don’t make wage-earners worse off relative to others in society (in fact, the excess demand pressures I’ve highlighted seem to have boosted NZ wages relative to growth in nominal GDP per hour worked), and the view – that the Commission seems at times sympathetic to – that high immigration to New Zealand may nonetheless have damaged economywide productivity growth, and thus held back the improvements in living standards that all of us might have aspired to. They aren’t at all inconsistent (and similarly if the optimists are right high immigration could be boosting economiywide productivity growth, and yet in such a world we might still see wage-earners getting a slightly small share of a much larger GDP per capita).

As it stands at present, the Productivity Commission’s work on immigration just really isn’t fit for purpose. No wonder what they presented us with highlighted those third order or bureaucratic process points rather than offering something offering genuine New Zealand specific insight on how this major tool of public policy has, or has not, worked for the economic wellbeing of New Zealanders.

[Note significant UPDATE at the end of this post.]

The only good case for having an entity like the Productivity Commission is if it delivers serious in-depth research and analysis – insight – on significant public policy issues, and does so without fear or favour. In principle, there might have been a decent argument for such an institution (I used to be persuaded) given the weaknesses of academe (at least on New Zealand policy issues), the relative absence of think-tanks, and the deterioration in our core public service advisory agencies. But it is hard to fix just one small part of organisational mix, and even more so when those (a) holding the purse strings,and (b) making key appointments demonstrate no appetite for, or interest in, serious research and analysis. And thus, 10 years into its existence, we have the diminished Productivity Commission.

It was never likely to be easy to create and sustain a good entity of that sort, with no critical mass (unlike the much larger Australian equivalent which initially inspired the creation of the New Zealand one), and just up the street from key ministries (the Australian equivalent is an Melbourne, so an attractive option for people who do not want to live in Canberra). But this government seems to have basically given up trying. But then they’ve consistently indicated little or no interest in reversing the decades of relative productivity decline, even though fixing this failure would provide the best long-term support for fixing many of the things they often claim to have gone into politics for.

That was all exemplified with the appointment a year ago of their mate Ganesh Nana as the new chair of the Commission. Doubts that I and others expressed at the time have been more than vindicated since (be it speeches, interviews, or other public statements).

But if there was still any doubt, the diminished state of the Commission was fully on display with the release yesterday of the draft report on the immigration policy inquiry. Immigration (of non-citizens) is a huge government intervention lever, deployed in New Zealand on a scale far larger than in almost any other countries, with (potentially) significant economic, social, and cultural implications. In New Zealand, champions of the large-scale non-citizen immigration policies – run for much of the last 150 years – repeatedly claim that there are significant economic benefits to New Zealanders from such policies, even as for decades now our position in the global economic league tables has kept on dropping away. Perhaps the advocates are right, perhaps they are not. But you might suppose it was a topic warranting some serious and in-depth research and analysis, New Zealand specific but engaged with diverse cross-country experiences, that really engaged with the issues and experiences and offered compelling insights on what might work best, for what end, and how.

But if that was the sort of report anyone was hoping for, it bore no resemblance to what the Commission has delivered. I’m sure there may even be a first-rate case that could be made for how New Zealand’s immigration policies of recent decades have made (or will soon make) most or all of us economically better off – that is, after all, the thrust of the rhetoric from successive governments, and ministries like MBIE (that used to tout New Zealand immigration policy as being a “critical economic enabler”). It would be fascinating to read – and engage with – such a document. But even though it largely champions something like the (pre-Covid) status quo, the Productivity Commission’s piece offers nothing serious to engage with. I wasn’t a great fan of the New Zealand Initiative’s report on immigration policy/experience a few years ago (and offered extensive commentary in a series of posts collated here), but it was a worthier effort – on fewer resources – than the Productivity Commission’s.

The essential vapidity of the report – most especially on anything relevant to productivity and economic performance – seemed well-captured in this extract from the final page of the Commission’s four page summary of the report.

So the very first recommendation – one of three in that shaded box – is that ultimate Wellington-insider type of recommendation: more jobs for bureaucrats writing policy statements for the governments. Nothing about the substance, all about process. It isn’t necessarily a stupid idea, but surely as about item 25 on a list of second-tier recommendations?

I suppose every Wellington bureaucrat these days feels obliged to invoke (or conjure up) Treaty of Waitangi dimensions, and so the Commission also has it in its top-3. But the focus of the Commission is – or was supposed to be – primarily economic in nature (there is something of a clue in the name) and all the commissioners – and probably all the professional staff – are economists so one if left wondering what they have to add on Treaty issues, at least beyond their personal politics (quite far left in the case of the chair). Same goes for that weird suggestion that learning Maori might be made a factor in granting residence – I suppose some might think it a good idea, but you might have thought there would be at least some attempt to highlight potential trade-offs (in which, for example, some of the more potentially valuable migrants might find learning a niche language – or least jumping through hoops appearing to do so – something of a deterrent).

I don’t have any particular problem with something along the lines of a couple of the recommendations. Providing more flexibility for those of time-limited work visas to change employer makes some sense (although would make more sense as part of my scheme whereby employers would pay a significant fee to hire short-term migrant workers), and the suggesting about limiting the rights of return of permanent residents who leave seems sensible (if niche), as might a provision to allow only citizens to vote (a more normal practice overseas). But relative to the scale of the intervention immigration policy represents these are second or third order issues at best.

And all that is left, which might have some substance (for good or ill), is the second of those highlighted recommendations, but even there is less to it than meets the eye. Net migration flows (in, out, New Zealander, other) are volatile, but that isn’t mostly because New Zealand policy is volatile. Instead, most of the volatility arises because when the Australian labour market is strong the net outflow of New Zealanders to (higher-paying) Australia increases, and when the Australian labour market is less strong the net outflow diminishes (often quite sharply). There isn’t anything much New Zealand governments can do about that – other than (which would be grossly against the interests of New Zealanders) begging the Australian government to limit our escape option. It is disconcerting that in the draft report the Commission still seems to be hankering to attempt to smooth the net flow (without changing the average rate of immigration over time) and says it will be thinking more about options before presenting their final report. I suspect that if there is one thing the champions of high immigration and the sceptics (like me) agree on is that attempting to use policy to fine-tune flows is a daft, and probably unworkable, idea (it always used to be MBIE’s line to me when I was still an official – and not championing such fine-tuning – and I was at a meeting at the Commission within the last couple of months at which a strongly pro-immigration economist and I (united on almost nothing else in that discussion) strongly urged them not to try. If the Commission thinks they, or MBIE, can forecast the Australian labour market that well, that far in advance – and then adjust policy and movement that quickly – then the macro authorities in Australia probably have jobs on offer for them. And if the government does want to encourage large average migration inflows – to an underperforming remote economy – changing the rules frequently (with forecasts and mis-forecasts of the economic cycle) simply isn’t a sensible way to be attractive to the few really able people likely to be seriously interested in settling here.

The draft report (at 68 pages) is much shorter than many of the Commission’s reports over the last decade. Unfortunately, with the greater brevity has come an absence of much serious analysis or engagement, or even a framing of the issues. The report is accompanied by a series of special topic papers, and I turned, hopefully, to the one headed “Impacts of immigration on the labour market and productivity”. That alone is 98 pages, but (a) the text runs out after 48 pages (the rest is mostly just charts) and (b) most of the rest is boilerplate description of the data, offering no insight to anyone who knows the New Zealand story. And when we finally get to a few pages on productivity – and you will recall that over the years the Productivity Commission has consistently highlighted New Zealand’s long-running poor outcomes – the Commission’s treatment involves no serious engagement with the New Zealand data or experience, no fresh analysis or research (commissioned or in-house) but rather (a) on the global picture a description of one academic paper, and (b) on New Zealand specifically, a single paper done for the old Department of Labour by the Commission’s chair some years ago, in which sure enough gains to per capita income show up, but solely by construction (it is a CGE model) and in which any possibility of productivity gains (or losses) is assumed away by construction. Nana has long been on record as a champion of large scale immigration, and juicing the population of our cities (he was my interlocutor in this RNZ discussion) but his paper sheds no light (and really can’t do so by the technique used).

Overall, the report is the sort of thing an average MBIE policy team could have churned out. It offers little or no insight, no fresh analysis or research, but offers a few tweaks (some sensible, some not) which a government that likes mass migration (and Labour has for several decades now) can nod sagely at and perhaps make the odd change (and of course some red meat to the Labour Maori caucus).

Now regular readers might be wondering how the Commission has treated the arguments I have been making over the last decade or so about New Zealand’s immigration policy and our disappointing economic performance.

I noticed that a recent speech was shown in the list of references so I searched the document to find out where they had referred to it. The solitary reference was here

This raises the question of whether overall resident approval numbers (the “planning range”) should be reduced or linked to
other factors, such as outflows of New Zealanders or the state of the economy. If other changes are not made to ease restrictions on housing construction and to boost investment, a “least regrets” approach implies setting the planning range at lower levels
than has been the case in recent years. Some commentators and submitters argued for setting the planning range at much lower levels (Reddell, 2021).

Which is, to say the least, a bit naughty, as neither in that speech nor in anything I’ve written in recent years, have I suggested tailoring the residence approvals numbers to housing construction, the cyclical state of the economy, the outflow of New Zealanders, and the “least regrets” framing is one that I have not used (I think it originates with the economist Julie Fry).  But, however they describe it, the Commission simply presents the idea of lower numbers of residence approvals, makes no comment and moves on.

A few pages earlier, the Commission does devote half a page to a discussion of “arguments from a macroeconomic perspective suggesting that fast population growth may have suppressed New Zealand’s productivity growth”.   I recognise some aspects of some of my arguments and analysis in what follows, and I suppose it is welcome that –  without further analysis or testing – they comment that 

Aspects of New Zealand’s economic performance over the past 30 years are consistent with these arguments, including a persistent high real exchange rate (despite poor relative productivity growth which would tend to push the exchange rate down), a flat or falling share of exports to GDP, slow rates of productivity growth, and high real interest rates compared with other developed countries. Immigration is unlikely to be the sole cause of these trends, but the symptoms are consistent with it being at least a contributor.

But that is it. Which is strange, because the story has implications. If it is right (in whole or in part), it argues for much less trend immigration (at least to the extent economic outcomes matter a lot), and if it is wrong, well it should be exposed and demonstrated as wrong. Instead, we get “symptoms are consistent with it being at least a contributor” and then they move on to the next topic. It does not create much confidence that they have thought hard or engaged much. Instead, as they move to the next paragraph, they seem to confuse and conflate these arguments with quite different issues and arguments (that I’m certainly not making) about housebuilding and construction of public infrastructure.

When people refer back to this report in years to come – as no doubt some will – no doubt the champions of large scale non-citizen immigration will find support. But no one – pro or con – will find illumination. But with nothing challenging, nothing troubling, no doubt the Beehive will have been happy, and the powers that be at the Commission will have rewarded the trust ministers showed in appointing their mates.

I have tried to look at the report not just through the lens of my own views on a sensible immigration policy for New Zealand. If one is evaluating the quality of a report, what matters isn’t just (or even mainly) if the authors end up agreeing with you, but how. I can’t believe that any serious champion of large scale immigration to New Zealand (and there are some, not just among the self-interested) would regard this report as a serious and useful contribution to a better understanding of the issue in New Zealand. If those were my views – and of course they aren’t – I’d be a bit embarrassed that this was the best the government’s Productivity Commission had managed to come up with.

As it happens, I am very curious as to how the Commission ended up where it did. I chose not to make a submission, on some combination of lack of confidence in the Commission, health, and a sense that staff and at least some commissioners were well aware of my arguments, which had been documented extensively over the years. But about three months ago I had an approach from a senior staff member asking if I would write a paper for them, which they would have reviewed and would then publish, articulating the “Reddell hypothesis” and reviewing the experiences here and abroad that might help shed light on the issues etc.

I declined almost immediately, and after some further engagement not only declined but suggested that such a paper would not necessarily be in their best interests even if the Commission was to be sympathetic to my story (they’d have been much better off getting someone not precommitted to review the arguments and evidence). But I have since had a couple of sessions with staff and commissioners on the issues and arguments, and while I’m not going to go into detail on the substance of those discussions, suffice it to say that it was something of a surprise to read the report, and the lack of serious engagement with the issues and experiences.

It is, of course, up to the Commission what issues and arguments and experiences it addresses. But for anyone interested in exploring mine further

this was the speech the Commission (somewhat misleadingly) linked to

and these were notes for a recent lecture at Victoria University

and this is a longer version of a recent book chapter in which I explore New Zealand’s longer-term economic underperformance, distance, and the inconsistency between our immigration policies and producing first world living standards at this distance from the world.

UPDATE:

Silly me. I assumed that any substantive discussion of effects of immigration policy on productivity might appear either in the main report or in the supplementary paper I linked to earlier “Impacts of immigration on the labour market and productivity”. However, the Commission has just pointed me to another supplementary paper which – because it was under the heading “The wider wellbeing effects of immigration” and I am mainly interested in economics and productivity – I had not read. It turns out that “the wider wellbeing effects” is mostly about economic effects, and that there is a whole chapter (pp12-19) on macroeconomic issues and arguments, including a sub-chapter on the “Reddell hypothesis”. I had seen an earlier draft of that chapter and had provided some comments on it.

It is a little strange to have (a) published this core economic material in a chapter under such a heading and then (b) not to cross-reference it in the main report, but for what it is worth the chapter includes this specific official “finding”.