Economics And Immigration
Economics And Immigration
By Dr Muriel Newman
Last Thursday, the Governor of the
Reserve Bank Graeme Wheeler lowered the Official Cash Rate
by 25 base points from 3.5 percent to 3.25 percent. With New
Zealand’s inflation rate running close to zero, factors
influencing his decision included a 55 percent decline in
the oil price from June last year, and a 55 percent drop in
dairy prices.While he expects the
resulting interest rate drop and exchange rate decline will
help to cushion the dairy sector and provincial New Zealand
to some extent, concerns have been raised that the lower
cost of borrowing may drive up demand for housing in the
already over-heated Auckland property market.
Auckland’s problems are the result of
the demand for housing outstripping supply. It is a massive
market failure caused, to a large extent, by councils
adopting radical environmentally-driven land use
restrictions to prevent urban sprawl. This has resulted in
the amount of land being released for housing development
being insufficient to keep up with population growth.
The Housing Minister Nick Smith also
blames the Resource Management Act, saying it has added as
much as $30 billion to the cost of building new homes, and
stopped as many as 40,000 houses being built over the past
decade. With lending on housing making
up around half of all bank lending in this country, and with
a home being a family’s single largest asset, the Reserve
Bank has identified the housing market as a potential risk
to New Zealand‘s financial stability.
This week’s NZCPR Guest Commentator, Dr Roger Bowden, formerly of Victoria University’s School of Economics and Finance, points out that while there are clear positive gains from immigration, there are also significant downsides: “The economic gains from immigration have been well documented. Properly regulated, it augments the nation's human capital. If we get it right, the immigrants can be a source of financial capital. Immigration is a terrific economic stimulus in itself; right now it is helping NZ ride out our own commodity price downturn. And let's not forget the education industry, large slices of which are bottom feeding off South East Asian students. A cynical view, not too far from the truth, is that we're not selling the quality of our education so much as the right to look for a job here afterwards, get residence; and bring Mum and Dad over as permanent residents as well, something you can't do in most other countries. “But there are downsides to immigration. Local resentment from being locked out of the Auckland housing market by high prices, some of it fuelled, directly or indirectly, by endemic South East Asian corruption. And as an 'oldie whose taxes, and the hard work of my forebears, have helped to pay for our infrastructure, it grates a bit to a have wealthy immigrants enjoy it all scot free. And then there's the exposure to criminal activity from poor screening, including circumventable investment qualification regimes.”From time to time the criminal activities of immigrants hit the headlines, but few could be worse than the case of Van Thanh Tran, who was on the unemployment benefit from immigrating to New Zealand in 1993 until 2012. According to theHerald, Mt Tran was one of six high rollers at SkyCity casino under surveillance by the Police. Operation Ghost targeted an organised crime syndicate smuggling large shipments of pseudoephedrine from China into Auckland. Mr Tran was the ‘boss’. SkyCity records show that over the years, the amount of money won and lost was $67 million.The fact that Mr Tan was able to remain on an unemployment benefit for almost 20 years raises serious questions about how well migrants are monitored once they arrive in New Zealand.In the UK, not only are welfare payments to migrants restricted until they have lived in the country for four years, but if they haven’t found a job within six months, they are required to leave. With immigration being an issue of huge concern in Britain, where foreign workers flood into the country under the European Union open doors policy, taking jobs from locals, newly re-elected Prime Minister David Cameron has pledged major change. First and foremost will be a crackdown on illegal immigrants. Illegal working will become a criminal offence, which means employers hiring illegal immigrants will be breaking the law. Landlords will be asked to check whether their tenants are illegal immigrants, and if they are the process for evicting them will be fast-tracked. Banks will be required to close down accounts held by illegal immigrants. And the “deport first, appeal later” rule that is already used for foreign criminals will be applied to illegal immigrants as well. According to figures provided by our Immigration Minister Michael Woodhouse, while New Zealand had more than 14,000 illegal immigrants in 2013, only 757 people had been deported in 2012. David Cameron is also committed to reducing the demand for skilled immigrants in the UK through better training of locals: “For too long we’ve had a shortage of workers in certain roles. Engineers, nurses, teachers, chefs – we haven’t had enough Brits trained in these areas and companies have had to fill the gaps with people from overseas. Some professions are on the Shortage Occupation List year after year and nothing is being done about it. So we will seek to limit the length of time professions can be classed as having shortages. Sectors that have become over-reliant on migrant workers will be encouraged to train Brits instead. What’s more, we’ll make it illegal for employment agencies to recruit solely from abroad without advertising those jobs in Britain and in English.”The fact that New Zealand’s long-term skills shortage list includes chefs, database administrators, food technologists, surveyors, engineers, diesel mechanics, nurses, vets, physiotherapists, and social workers, does raise serious questions about how well our education sector is readying our young people for future careers in this country.
David Cameron is also planning severe penalties for employers who exploit foreign workers. Similar measures have just been introduced here. Under the new 2015 Immigration Amendment Act, any employer who is found to be exploiting temporary migrant workers will face a jail term of up to seven years and a fine up to $100,000. If such employers hold a residence visa, they will be liable for deportation if the offence was committed within 10 years of gaining residence.Historically, immigration has filled skills gaps when Kiwis go to live abroad. While there will always be tensions when foreigners move to a new country, in time, most will adapt and become good citizens. However, the numbers have increased over recent years, and questions are now being asked as to whether we need to follow the UK's lead in cracking down on illegal immigrants and improving the training of New Zealanders to reduce the demand for skilled migrants.
ENDS