Permanent departures up, arrivals down
Net permanent migration flows have a substantial impact on New Zealand's small, open economy. Net permanent migration is
trending lower as departures have increased and arrivals have flattened off. In the month of October, New Zealand gained
just 260 long term immigrants, taking the annual sum down to 7,500. The annual sum of net migrants is now lower than the
8,300 reported in September, and well short of the cyclical peak of over 42,500 touched in mid-2003 (chart). As the
charts below suggest, large swings in net permanent migration impact housing demand, consumption and even labour market
dynamics (see research note attached). Should this downtrend continue, the downside to New Zealand's weakening housing
market will be exacerbated.
Large swings in net migration often trigger economic instability in New Zealand. Rising net migration fuels demand for,
and even speculative behaviour, in the housing sector, which stimulate non-tradables inflation and strengthens the need
for tight monetary policy. Moreover, falling (or negative) net migration contributes to weakness in residential
investment and domestic demand (charts). The current downturn is adding to the weakening demand in the housing market
and will lower the floor under consumption growth.
Short term international travel in October was affected by the rugby world cup in France, with the number of NZ
residents departing to France and the United Kingdom increasing 10%oya. There is no need to mention the result of the
rugby world cup....... There were just 179,900 visitor arrivals in October, a decrease of 6,700 (4%oya) on the 186,600
visitor arrivals in October 2006. That said, given the strength of the NZD, the level of tourist flows into New Zealand
has been surprisingly resilient. The number of visitor arrivals in October was the third highest total recorded for an
October month.
Ends