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Immigration transforming economy

By Lawrence Johnston

IMMIGRATION'S role in transforming New Zealand's economy was highlighted in a speech by Immigration Minister David Cunliffe last month.
Maximising the economic value of immigration required not only a clear vision for the country's desired goal - transformation to a high-knowledge, high-value economy. It also required a clear strategy to deal with competing demands, Mr Cunliffe told the Auckland Chamber of Commerce.
Increasingly, the government was focusing immigration more directly on the key levers of productivity, not just on population.
With unemployment at a near-record low and labour participation rates among the OECD's highest, that was particularly important now.
But GDP per capita was just below Tasmania's, so new high-value goods and services needed to be produced from the nation's traditional resources - neutraceuticals from milk powder, timber-ceramic composites from pinus radiate, and export education from polytechnics.
Also needed was capital rooted right there in New Zealand, returning sustainable income to New Zealanders. And technology needed to be transferred in, or grown by leading New Zealand businesses supported by world-class skills.
It meant hot-housing innovative Kiwi businesses further through from start-up to scale-up and protecting Kiwi technology and intellectual property. Smart, strategic immigration could contribute to all those goals.
It could benefit Kiwi productivity by ensuring a New Zealand win on the global brain exchange, by importing more world-class skills than the country lost.
It could reinforce Kiwi business growth, by giving active investors a reason not only to build real businesses there, but to become real Kiwis themselves in the process.
It meant focusing on actively acquiring assets - financial, technological, skills and international connections - not just waiting to see who turned up, then having to socialise their liabilities.
But there were risks. risks.
"We must always ensure capable Kiwis get jobs first. Immigration should never substitute foreign for domestic labour because it is cheaper," he said.
Stressing the importance of migrant quality, Mr Cunliffe referred to recent media comment about migration's contribution to aggregate demand and inflation. The Reserve Bank had noted some correlation between house prices, particularly in Auckland, and net permanent and long-term migration.
Conversely, some politicians had tried to play up fears based on outbound migration numbers that the end was nigh. But in the 12 months to March 31, the net inflow of permanent and long-term arrivals had been only 12,100 people. Without immigration, New Zealand would be suffering an economically unsustainable net loss of people. "We are, therefore, winning on the global brain exchange," Mr Cunliffe said.
Also, some three quarters of all New Zealanders who left, later returned.
The relationship between inflation and net migration was complex, and the data mixed.
Migration effects were likely to be relatively small compared with other economics. But the government remained intent on ensuring that migration contributed more to expanding the capacity of the economy, than it did to aggregate demand.
Therefore, he intended concentrating on quality settlers, not quantity for its own sake.
The challenge was to address skill shortages and contribute to the non-inflationary expansion of supply in the economy without expanding demand at inflationary rates.
On that basis, he said that the number of migrants approved under the New Zealand Residence Programme over the last 12 months was likely to be at the lower end of the 47,000 to 52,000 band set out in this year's programme.
This managed trend had already seen a movement of net migration figures closer to balancing over the last few months. He expected that trend to continue.
Similarly, he expected that the targets about to be announced for the next 12 months would result in a modest lowering of the Residence Programme band for the 2007-08 year.
* The latest Department of Labour Quarterly Migration Update, showed that 10,324 permanent or long-term arrivals in New Zealand in the year to March 31, were from the UK.