New Zealand Immigration hits fresh record high

Published 19 December 2023 | 2 min read

5.6% surge raises alarms amidst record immigration

New Zealand has witnessed a surge in immigration, with net arrivals reaching a staggering 128,900 in the year ending October, as reported by Statistics New Zealand. While this influx was primarily driven by the arrival of 173,400 non-New Zealand citizens, concerns are rising among policymakers and business leaders alike.

Prime Minister Christopher Luxon expressed doubt about the sustainability of the current immigration levels, particularly with a staggering 118,000 reported in September. The concerns are not unfounded, as the Reserve Bank of New Zealand (RBNZ) initially welcomed the influx of foreign workers to ease labor market pressures and wage inflation post-COVID. However, this relief has now transformed into apprehension due to the potential impact on inflation.

The immigration issue

In a recent Bloomberg article, Deputy Governor Christian Hawkesby emphasised the RBNZ's inability to overlook the immigration surge. Despite expectations that the influx will subside in 2024, inflation remains a persistent challenge, currently sitting at 5.6%—above the targeted 1-3% range. The central bank projects a return to the upper band by Q3 2024, indicating a need for proactive measures.

While net arrivals in October marked a decline to approximately 9,300—the lowest since December—the overall trajectory suggests that the immigration surge may not be sustainable in the long run. This poses challenges for businesses, particularly in managing skilled workforce shortages without adversely impacting the housing market and other critical infrastructure.

What's on the horizon for employers?

Prime Minister Luxon assures that the government is yet to set a specific immigration target. However, the focus is on finding a delicate balance. The aim is to address skill shortages in the workforce without overwhelming the housing market and other essential infrastructure. Striking this equilibrium will require collaborative efforts from both the government and businesses.

Mark Smith, senior economist at ASB Bank in Auckland, emphasises the need for caution, stating, "We expect the RBNZ to remain wary of a net migration boost to housing and economy-wide inflationary pressures." As core inflation declines slowly, restrictive OCR settings may be necessary for some time, with expectations that cuts may not occur until 2025.

In conclusion, the record-high immigration levels in New Zealand demand careful consideration from employers, managers, and HR professionals. Navigating the delicate balance between filling skill gaps and averting potential economic challenges will be crucial for sustaining growth while preserving the unique Kiwi way of life.