Category Archives: NZ Politics

Winston Peters’ view on capitalism will challenge new Govt – Chris Trotter.

Crucial to the success of the “unfriendly capitalism” indicted by Winston Peters has been its stalwart bodyguard of “expert lies”.

Ever since 1984, when its unfriendliness began gathering pace, a seemingly endless procession of “experts” has been summoned to represent this new “unfriendly” capitalism’s cruelty as kindness.

Some of these so-called experts were paid for by the big corporations. Others were commissioned by government agencies to prepare the way for changes destined to place an ever-increasing number of New Zealanders at the mercy of private economic power.

None of the core institutions of the New Zealand State were exempted from this “restructuring” process. Health, education, social welfare, the trade union movement, the universities, local government: all fell victim to the “gleichschaltung” (co-ordination) demanded by an increasingly foe-like capitalist system. And, in each case, these government “reforms” were presented to the public as the only rational response to what was, after all, “expert” opinion.

In a tiny number of cases, the tendered “expert advice” was so extreme that the Government of the day simply balked at introducing reforms that seemed so patently politically unsaleable. For the most part, however, the experts’ findings were accepted and implemented.

That these arguments, for what can only be described as dramatic and socially-wrenching change, were received uncritically, and then promoted enthusiastically, by the news media was a crucial factor in their success. It encouraged the view that economic management had become such a complex business that “ordinary people” could not, realistically, be expected to play any useful role in the formulation of economic policy.

It required the system-threatening shock of the Global Financial Crisis of 2008-09 to set off a world-wide revolt against what we now call “neoliberal” economic orthodoxy – and the “experts” who have for so long expounded and defended its “principles”.

This revolt has come late to New Zealand because, through the worst years of the Global Financial Crisis, the Chinese economy’s absorption of so many of this country’s exports shielded it from the high levels of unemployment and the swingeing austerity programmes which have unsettled so many larger western nations.

On October 20, however, the NZ First leader, Winston Peters, from the stage of the Beehive Theatrette, told New Zealand that: “Far too many New Zealanders have come to view today’s capitalism, not as their friend, but as their foe. And they are not all wrong. That is why we believe that capitalism must regain its responsible – its human face. That perception has influenced our negotiations.”

In that moment, it was clear that the revolt against neoliberal economic orthodoxy and the lies of its “experts” had finally reached New Zealand’s shores. That, in his declaration for a Labour-NZ First-Green Government, New Zealand was experiencing its very own “Brexit” moment, would become even clearer when Peters declared that he and his party had rejected the option of a “modified status quo” in favour of “real change”.

Just how much “real change” Jacinda Ardern’s government is willing to countenance will be revealed in the people she chooses to advise her.

At the APEC summit in Vietnam in early November, where she is hoping to persuade the remaining 11 signatories to the Trans-Pacific Partnership to allow New Zealand to renegotiate the Investor State Dispute Settlement provisions of the agreement, who will Ardern include among her expert advisers? A prime minister whose ambitions extended no further than slightly modifying the status quo would limit her APEC entourage to all the usual MFAT and private sector suspects. A prime minister determined to signal her commitment to “real change”, however, would invite Professor Jane Kelsey to join her in Danang.

A “Real Change” Government, determined to reverse the draconian policies adopted by a Ministry of Social development advised by neoliberal “experts”, would call upon the experience and expertise of Sue Bradford and Metiria Turei. Those who find themselves astonished and/or offended by the thought of two such bitter opponents of this country’s actuarially inspired and excessively punitive welfare system being asked to advise Jacinda’s government on its root-and-branch reform should, perhaps, pause and consider just how radical (albeit from the opposite end of the political spectrum) was the “expert” advice that created it.

In his review of four recent books addressing the worldwide “rage against the elites”, Professor Helmut K Anheier, of Berlin’s Hertie School of Governance, writes: “It is well within elites’ power to make decisions that benefit all of society, rather than narrow interests. Elites have surely failed in this regard over the last quarter-century, but they need not continue to fail in the future.”

But, is it reasonable to expect “real change” advice from the same neoliberal elites whose ideologically-driven recommendations created the very problems our new government is pledged to solve?

Capitalism with a “human face” has no need of a bodyguard.

ARE WE AS BRAVE AS LABOUR IN THE 1930s?- Bryan Gould.

New Zealanders like to think that we are, in most respects, up with – if not actually ahead of – the play. Sadly, however, as a new government is about to emerge, there is no sign that our politicians and policymakers are aware of recent developments in a crucial area of policy, and that, as a result, we are in danger of missing out on opportunities that others have been ready to take.

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The story starts, at least in its most recent form, with two important developments. First, there is the now almost universal recognition that the vast majority of money in circulation is not – as most people once believed – notes and coins issued on behalf of the government by the Reserve Bank, but is actually created by the commercial banks through the credit they advance, using bank entries rather than cash, and usually on mortgage.

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The truth of this proposition, so long denied, is now explicitly accepted by the Bank of England, and was – as long ago as 1994 – explained in a letter written by our own Reserve Bank to an enquirer, and stating in terms that 97% of the money included in the usually used definition of money known as M3 is created by the commercial banks.

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The proposition is endorsed by the world’s leading monetary economists – Lord Adair Turner, the former chair of the UK’s Financial Services Authority and Professor Richard Werner of Southampton University, to name but two. These men are not snake-oil salesmen, to be easily dismissed. They have been joined by leading financial journalists, such as Martin Wolf of the Financial Times.

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The second development was the use by western governments around the world of “quantitative easing” in the aftermath of the Global Financial Crisis. “Quantitative easing” was a sanitised term to describe what is often pejoratively termed “printing money” – but, whatever it is called, it was new money created at the behest of the government and used to bail out the banks by adding it to their balance sheets.

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These two developments, not surprisingly, generated a number of unavoidable questions about monetary policy. If banks could create billions in new money for their own profit-making purposes, (they make their money by charging interest on the money they create), why could governments not do the same, but for public purposes, such as investment in new infrastructure and productive capacity?

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And if governments were indeed to create new money through “quantitative easing”, why could that new money not be applied to purposes other than shoring up the banks?

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The conventional answer to such questions (and the one invariably given in New Zealand by supposed experts in recent times) is that “printing money” will be inflationary – though it is never explained why it is miraculously non-inflationary when the new money is created by bank loans on mortgage or is applied to bail out the banks.

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But, in any case, the master economist, John Maynard Keynes, had got there long before the closed minds and had carefully explained that new money could not be inflationary if it was applied to productive purposes so that new output matched the increased money supply. Nor was there any reason why the new money should not precede the increased output, provided that the increased output materialised in due course.

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Those timorous souls who doubt the Keynesian argument might care to look instead at practical experience. Franklin Delano Roosevelt used exactly this technique to increase investment in American industry in the year or two before the US entered the Second World War. It was that substantial boost to American industrial capacity that was the decisive factor in allowing the Allies to win the war.

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And the great Japanese (and Keynesian) economist, Osamu Shimomura, (almost unknown in the West), took the same approach in advising the post-war Japanese government on how to re-build Japanese industry in a country devastated by defeat and nuclear bombs.

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The current Japanese Prime Minister, Shinzo Abe, is a follower of Shimomura. His policies, reapplied today, have Japan growing, after years of stagnation, at 4% per annum and with minimal inflation.

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Our leaders, however, including luminaries of both right and left, some with experience of senior roles in managing our economy – and in case it is thought impolite to name them I leave it to you to guess who they are – prefer to remain in their fearful self-imposed shackles, ignoring not only the views of experts and the experience of braver leaders in other countries and earlier times, but – surprisingly enough – denying even our own home-grown New Zealand experience.

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Many of today’s generation will have forgotten or be unaware of the brave and successful initiative taken by our Prime Minister in the 1930s – the great Michael Joseph Savage. He created new money with which he built thousands of state houses, thereby bringing an end to the Great Depression in New Zealand and providing decent houses for young families (my own included) who needed them.

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Who among our current leaders would disown that hugely valuable legacy?

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Bryan Gould, 2 October 2017

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BryanGould.com

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The Last Thing Progressive New Zealand Needs Is A Coalition Of Contradictions – Chris Trotter.

It is possible to want something too much.
The New Zealand progressive community’s hunger for power – so shamelessly on display since Election Night – has led it to treat Labour, the Greens and NZ First as unambiguously progressive entities capable of working together without fault or friction. That they know this assumption to be false has not prevented them from presenting a Labour-NZ First-Green Government as unequivocally “a good thing”. Consequently, there is now a real danger of a coalition of contradictions being brought into existence: a forced parliamentary alliance with the potential to be as politically unedifying as it is electorally short-lived.

As by far the most progressive member of the tripartite alliance in prospect, the Greens will be expected to make the most wrenching compromises and concessions. They will discover very rapidly just how vast the discrepancy is between NZ First’s and Labour’s pro-environmental rhetoric, and any willingness on their part to join with the Greens in rolling-out the practical policy measures necessary to give it effect.

The differences between the Greens: a party rooted in the most sophisticated layers of metropolitan New Zealand; and NZ First: a party drawing it most steadfast support from the country’s smallest towns and rural servicing centres; is unlikely to be limited to the best means of tackling climate change and cleaning up the rivers. The Greens and NZ First will find that they are not only at odds over what constitutes practical policy, but that, culturally, they have almost nothing in common. Metiria Turei spoke no more than the truth when she described NZ First as a “racist” party. Quite how the Greens will cope with the sexism and homophobia that is reportedly rife within their newfound ally’s ranks will be agonising to observe.

The Greens’ relationship with Labour is likely to be even more fraught. Disagreements are always sharpest between those who believed themselves to be in accord on the issues that matter most – only to discover that they aren’t. Jacinda’s promises about eliminating child poverty notwithstanding, Labour is not about to abandon its policy of keeping in place a regime of strong “incentives” to “encourage” beneficiaries to move “from welfare to work”. There will be no bonfire of MSD sanctions under Jacinda. Nor will there be a 20 percent increase in beneficiaries’ incomes.

The one election promise Labour will keep and, since the Greens foolishly signed up to it as well, the promise their junior partner will also be expected to honour, is the promise to abide by the self-imposed restrictions of the Labour-Green “Budget Responsibility Rules”. Since these amount to a guarantee that National’s undeclared austerity regime will remain in force across whole swathes of the public sector, it is impossible to avoid the conclusion that the Budget Responsibility Rules will become an extraordinarily divisive force within any Labour-NZ First-Green coalition.

Having denied themselves the ability to raise income and company taxes before 2020, the Labour Party has effectively turned itself into a massive economic brake on its own, and its potential allies’, policy expectations. Unless the Greens and NZ First can persuade the likes of Grant Robertson and David Parker to avail themselves of hitherto out-of-bounds financial resources, this ‘progressive austerity’ will soon turn the coalition into a bitter collection of thwarted hopes and dreams.

Small wonder then, that, according to political journalists Richard Harman and Jane Clifton, there is a growing faction within both the National Caucus and the broader National Party to walk away from any deal with NZ First. Convinced that the coming together of Labour, NZ First and the Greens can only end in bitter disappointment and, ultimately, coalition-dissolving division, they are arguing that it is better to allow the “three-headed monster” to demonstrate its utter incapacity to provide “strong and stable” government for New Zealand. “Give them enough rope,” runs this argument, “and in three years – or less – they will have hanged themselves, and National will be back in the saddle and ready for another very long ride.”

It would be an enormous error for New Zealand’s progressive community to convince itself that the deep contradictions embedded in the manifestos of Labour, NZ First and the Greens can somehow be overcome. Far better for Labour and the Greens, the two parties who are, at least theoretically, ideologically compatible, to spend the next three years developing a suite of progressive policies capable of making a real difference to the lives of the many – not the few.

Right now, with the progressive community’s desire for political power so unreservedly on display, it should be very, very careful what it wishes for.

Bowalley Road

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New Zealand Election. “It’s the Economy, Stupid!” – Bryan Gould. 

It was Bill Clinton who identified the main issue in his election campaign as “It’s the economy, stupid”.

And so it almost always is, and New Zealand’s 2017 election campaign will be no different.

Of course other issues will matter too, but it is the economy, and the impact its fortunes will have on individual voters, that will usually have the greatest impact on the greatest number.

That is not usually seen as a plus for parties of the left. It is usually thought to the extent that it is almost an article of faith for some voters, notwithstanding the evidence of their own experience, that parties of the right are best equipped to manage the economy, and that other contenders for power necessarily start therefore at a disadvantage in that regard.

So Jacinda Ardern showed commendable courage when she devoted part of the time she had available in the first leaders’ debate to an economic issue.  That issue was productivity, or the lack of it.

Many experts, whether on the left or right, will agree that productivity growth is the essential factor in a successful economy. And most will say that our record in this regard is not good enough.

Why does it matter? Because it measures how much each individual worker across the whole economy produces on average. If our productivity gains are sluggish, as they have been, and fall behind those of other countries, we slip further down the international ladder in terms of living standards and prosperity.

We have been able to increase national output over recent years, but that is almost all down to taking in more immigrants. That produces a larger cake overall, but it does nothing to raise individual living standards, indeed, the reverse, since there are more slices to be cut from only a slightly bigger cake and we have to share our existing capital equipment with that greater number.

So, if productivity growth is the only sure way of raising living standards and providing more resources to spend on essentials, like housing, health and the environment, why have we failed to produce a better performance?

Because, as Jacinda Ardern pointed out, we have failed to invest in the new skills, new techniques, and new equipment and technology needed to increase the productive capacity of each member of the workforce.

We have failed to provide young people as they join the workforce with the skills, the training and apprenticeships, that are needed in a modern and competitive economy. We have handicapped our workforce by saddling large numbers with poverty (engendered by inequality) so that they have to contend with poor housing, health care and educational opportunities.

We have failed to provide incentives so that the necessary investment in new productive capacity, especially in research and development, and new equipment, is made.

And we have refused, for ideological reasons, to use the power of government to make good all these deficiencies.

Perhaps less obviously, we have failed to do what more successful economies do as a matter of course, move resources to the growth points in the economy. Where are those growth points? They should be, and almost invariably are, in the export sector, which is where the biggest markets are and where economies of scale, and therefore productivity gains, can most easily be achieved.

So, has our focus been, as it should, on improving our export performance and improving our export returns?  No, quite the contrary. We have insisted on running an economic policy characterised by high interest rates (in international terms at least) and an overvalued dollar.

As a result, our exporters face a constant head wind, because they have to charge a premium on everything they sell. And that makes it difficult both to compete for sales and  to earn a proper return on what they do sell. Just ask the dairy farmers or the Manufacturers and Exporters Association what the high dollar has done to them. Little wonder that the return on investment is so low that there is little to spend on raising productivity.

These failures are the government’s Achilles heel in managing the economy.  It seems Jacinda Ardern picked the right issue to focus on.

Bryan Gould, 1 September 2017


Jacinda tsunami is looking very hard to halt – Richard Prebble. 

Occasionally New Zealand elections produce a tidal wave. I witnessed the tidal wave that swept the Lange government to power. The pre-conditions are in place.

It is very hard for any government to win four elections in a row. Replacing Prime Ministers, Bolger to Shipley, Lange to Palmer has led to defeat in the next election. The signs are it will be a tidal wave.

First the tide goes out for the minor parties as it has for the Greens, United Future and Maori Party. New Zealand First is also losing votes to Labour.

Then the wave sweeps in. Anecdotal evidence is urban “John Key” women voters are switching to Jacinda Ardern.

Each poll shows the wave is gaining momentum. When Labour’s support crosses National’s it is all over.

The wave started when the Greens defended benefit fraud. Peters repaying his overpayment reminds us that Metiria Turia, who is still a Green candidate, has not.

Conditions were ideal for Labour. They just had the problem of their leader, until he fell on his sword.

In Jacinda, Labour have the ideal candidate for a five week campaign. Her regular Breakfast TV appearances have made her an accomplished TV performer.

The Maori Party is leaking votes to Labour too. Instead of campaigning on Maori water rights the party is campaigning for an amnesty for overstayers. They have lost the plot.

The only way to stop a tidal wave is to prevent it starting. Bill English and National’s strategist Steven Joyce are just too cautious. National also underestimated Ardern. In Parliament she has been ineffective. In six years she has not landed a single attack on Paula Bennett. But none of this matters.

This is the age of celebrity politics. It is image not substance. Macron in France, Trudeau in Canada, Trump in America and now Ardern in New Zealand. The camera loves Jacinda.

The red T-shirt crowd we first saw on TV may have been Matt McCarten’s “rent-a-mob” imported from overseas but mania when it gets going is infectious. Now the crowds are real.

I saw the Lange tidal wave. People came into my electorate office and took away handfuls of enrolment cards. On election day people lined up to vote in record numbers. Big enrolment and high voter turnout benefits Labour. As of June, the Electoral Commission estimated 445,234 voters (nearly all young and overwhelmingly Labour) had not registered. Last election just 76.77 per cent of those who did register voted. Labour strategists believe if they can lift enrolment and turn out, the party has 600,000 extra votes, enough to win.

Labour could be elected to govern alone. If the Greens, United Future, Maori and TOP all fail to reach the threshold then with the votes redistributed, Labour could govern alone on as little as 45 per cent. Winston Peters, confident he would be kingmaker, pulled New Zealand First out of the minor party debates. Now he finds himself in the middle of a benefit overpayment and is railing against “dirty politics”. What is worse, when Labour does not need him Peters becomes irrelevant.

What could stop the Jacinda tidal wave? A major failure in the leaders’ debates. Not likely. The Opposition Leader usually wins the leaders’ debate.

Labour is doing its best to lose. The party is rolling out Andrew Little’s ill-thought manifesto of promises the party never thought it would have to implement. In any other election promising to tax water, fuel, capital and tourism would be fatal.

All of Labour’s new taxes are extra. Many of Labour’s promises are just silly, such as trams up Dominion Rd. Others are reckless. “Nationalising” Maori water rights will prove very divisive.

If Labour continues to issue massive tax and spend promises for the next four weeks it may alarm the voters, though it seems nothing will turn the media against their love affair with Jacinda.

Elections are won by the party that sets the agenda. National wanted to make the management of the economy the issue. National has lost confidence in its strategy. It feels it must match Labour’s spending promises with its own. If the election is not fought on who can best manage the economy but on Labour’s agenda of housing, health and education, nothing will stop the Jacinda tidal wave. Five weeks is not long enough to discover whether Jacinda is too inexperienced and three years is going to be three years too long to learn the answer.

NZ Herald 

University of Otago’s Andrew Coleman looks at the intergenerational effects of the tax system on New Zealand’s housing markets. 

The tax system plays a crucial role in New Zealand’s housing markets. At the simplest level, the Goods and Services Tax is applied to new land development and new house construction, raising the price of new housing by 15%.

But the effects of the tax system are more complicated than this.

Since 1986 several tax changes have caused an intergenerational rift in New Zealand society by increasing the prices young people pay to purchase houses.

Some of these tax changes appear justifiable on efficiency grounds, but even these have made it more expensive for young people to purchase or rent property.

In conjunction with other tax changes that have artificially raised property prices, a generation of older property owners have become rich at the expense of current and future generations of New Zealanders.

The scale of the problem

The scale of the problem is seen by observing how average property prices have increased by over 220% in inflation-adjusted terms since 1989; the highest rate of increase in the developed world.

The average size of new houses has also increased more quickly than in Australia or the United States, the only two countries that publish this data.

The average size of a new dwelling in 2013 was 198 m2, up from 125 m2 in 1989, and nearly twice as large as the average new house in Europe.

The tax changes that have affected housing can be divided into those that affect the cost of supplying housing and those that affect the demand for housing.

Unfortunately, unravelling the effect of taxes on house prices and rents is challenging.

The effects depend on the extent that the supply of new housing is responsive to prices.

If the supply of housing is very responsive to prices, taxes that affect supply prices (such as GST) become fully reflected in prices, while taxes that affect demand (such as the relative size of taxes on housing income and other assets) do not. Conversely, if the supply of housing is not really responsive to prices, supply taxes like GST have little effect on prices but demand taxes have large effects.

The analysis is further complicated because the supply of land – particularly land in good locations – is less responsive to price than the supply of new houses.

It is quite possible that a particular tax can simultaneously lead to higher land prices but not much new land, and larger houses but not much of an increase in building costs.

Since 1989, the ways that the tax system affects the demand for housing has been the biggest problem.

The fundamental difficulty is that the returns from other classes of assets such as interest income are more heavily taxed than the returns from housing.

Because interest is more heavily taxed than the returns from owneroccupied housing – which are essentially the rent people get from their own home – people have an incentive to live in larger houses than otherwise, and pay more for well-located properties.

In the absence of this tax distortion, many people would choose to live in smaller houses and land prices in major cities would be a lot lower.

It is not unreasonable to suspect the premium people pay for well-located properties is twice as high as they would pay under a non-distortionary tax system.

Incentives

But this is not all. The tax system provides incentives for landlords to pay a much higher price/rent multiple for the houses they lease, largely because the absence of a capital gains tax.

Because the houseprice/ rent multiple could increase either because house prices increase or because rents decline (or some combination of both), the tax system could make buying more expensive or it could make renting more affordable. Most of the evidence suggests house prices have increased rather than rents have fallen; either way, the result is a tax-induced decline in home ownership rates.

When the tax system causes artificially high house prices, costs are imposed on current and future generations of young people, who have to borrow more and pay higher mortgage costs.

Why 1989? New Zealanders have never paid tax on the capital gains associated with house price increases, and the way housing is taxed was not fundamentally changed in 1989.

This is true. But the distortionary effects of taxation depend on the way houses are taxed relative to other asset classes, and in 1989 the government changed the way some other capital income is taxed.

Until 1989, money placed into retirement saving schemes was tax deductible, and the earnings from this money were not taxed as they accumulated.

Under this tax scheme – which is used in most developed countries including the United Kingdom, the United States, France, Germany, and Japan – the money placed in these savings schemes is taxed in a similar way to housing.

It reduces the incentive for owner-occupiers and landlords to overinvest in housing.

While the distortions in the current tax system could be eliminated by introducing a capital gains tax on housing and all other assets, and by taxing the rent you implicitly pay yourself when you own your home, most countries have found this too difficult to do.

As they have discovered, it is far simpler to change the way other savings are taxed.

On the supply side, in addition to GST, the Local Government Act (2002) has also affected the cost of supplying housing by changing taxes.

Instead of levying property taxes (rates) to fund the costs of developing new sections, local governments have progressively imposed development charges.

This change has improved efficiency by moving the costs of a larger city to the new people populating it, but it has also increased the price of housing right across cities.

People who bought before 2002 shifted the cost of new development to others, increasing the value of their houses, even though their development costs had been paid by other ratepayers.

For a long time, economists have pointed out that if you tax the income from housing less than other assets, you tend to increase land prices.

At the macroeconomic level, they have noted that this tends to increase national debt levels, and lower national income.

The first owners of land benefit from these schemes, but everyone else loses.

Perhaps this is a reason why other countries have been concerned to tax housing on a similar basis to other assets.

It is unfortunate New Zealand does not do so, even if the tax changes implemented since the late 1980s have proved very advantageous to middle-aged and older generations.

Interest.co.nz

Winston Peters doesn’t like Facts – The New New Zealanders: Why migrants make good Kiwis – Dr Rachel Hodder and Dr Jason Krupp. 

“The much-touted surplus will vanish in the twink of an eye when population growth driven by immigration is properly accounted for.”  Winston Peters

So much for Winston’s rubbish. Here’s some of what he doesn’t like, Facts. 


New Zealand is widely regarded as a unique place, renowned for its natural beauty, culture, economic freedom, and quality of life. Immigration has played an important part in achieving this outcome. Simply by moving here, immigrants have helped shaped the forces that make up modern New Zealand.

New Zealand has a lot to offer to both temporary migrants and those who want to make this country their home. But are we suffering from our own success?

With 125,000 people moving here on a permanent and long-term (PLT) basis in the June 2016 year, many question whether New Zealand’s open door policy threatens the things that make the country unique. Are migrants squeezing New Zealanders out of the job and housing markets? What does it mean to be a Kiwi when a fifth of the population are migrants? Are Kiwis paying higher rates and taxes because of migration? Isn’t the population too big already?

These are all valid questions, but ones difficult for the public to answer because of the complexity of the topic. The New New Zealanders addresses these questions by putting the latest research, data and analysis in the hands of the public. Broadly, it finds there is undoubtedly a cost to high levels of immigration, but it is outweighed by the benefits that foreigners bring to New Zealand.

Big numbers, fine detail

Arrivals figures can overstate the extent of permanent immigration to New Zealand. The PLT term covers all people who plan to spend more than 12-months in New Zealand, including many who are here temporarily. Of the 125,000 PLT arrivals, 29% comprised of New Zealand and Australian citizens. A further 55% comprised of people on temporary student and work visas. Official figures show less than a fifth of these temporary visa holders gain permanent residency.

PLT departures make up the other side of the migration equation. In the June 2016 year over 56,000 people planned to leave New Zealand for 12 months or more. It is also important to count those who have not left the country. New Zealand’s positive economic climate means more Kiwis are choosing to move back, even as fewer New Zealanders choose to leave. Overall, there was a net loss of 3,200 native born New Zealanders in 2016, the lowest level in the current PLT data series.

Integration story

Of those who do choose to move to New Zealand permanently, analysis of the New Zealand General Social Survey show immigrants integrate well. They are less likely to claim a benefit, more likely to be employed, and their children have better education outcomes than native born New Zealanders. There is relatively little ethnic or migrant clustering, and where concentrations do occur there is no indication of high unemployment. 87% of migrants say they feel they belong to New Zealand. Surveys show New Zealanders too have a generally positive view of migrants, and value the contribution that make to the economy and the cultural diversity they bring.

Home and feeling confident

Migrants certainly have an effect on the housing market, but one that is complex. Economists Bill Cochrane and Jacques Poot note that high levels of migration and high house prices occur when the economy is doing well, but one does not necessarily cause the other. That is because visitors on a temporary visa, such as students, do not tend to buy accommodation but rent it. In this they compete with Kiwis in the rental market, but the effects are modest. Rents in Auckland rose 0.2% in September 2016 compared to the same month a year ago. Cochrane and Poot suggest instead it is returning/remaining Kiwis, confident in their economic prospects, pushing up house prices.

Wages and productivity

The perception that migrants steal jobs from native born New Zealanders is wide-spread, but there is little evidence to support it. That is because the number of jobs in an economy is not fixed. Migrants also contribute to job growth by increasing demand for local goods and services.

Research into the effects of temporary migration in the decade to 2011 found a positive effect on the earnings and employment of New Zealanders. This may be because migrants fill jobs that native born are reluctant to do, and because migrants provide a boost to the sectors in which they work.

Despite concerns that immigration is dragging down GDP per capita even as headline GDP grows, the evidence suggests that there is little reason to be concerned. Research from New Zealand and overseas finds that immigration improves productivity and GDP per capita growth.

Fiscal impact

Migrants contributed a net +$2.9 billion to the government’s books in 2013. On a per capita level, this was equivalent to +$2,653 per migrant. Native born New Zealanders contributed a net +$540 million to the government’s books, or +$172 per person. This reflected the age structure of the native born population, with 47% in the economically active band in 2013, versus 60% for migrants.

Conclusion

On balance, the available evidence suggests that New Zealand benefits from migration, or at the very least the country is not made worse off. The current policy settings look broadly fit for purpose, but policymakers should be vigilant to ensure this remains the case.

Government should also consider reducing bureaucratic drag in the immigration system. Measures such as letting high salaries count towards a migrant’s point tally, and letting private businesses sponsor migrants could ease some of the red tape that keeps high quality migrants from moving here. New Zealand also needs to jump on opportunities for bilateral free movement agreements with other countries. Lastly, where there are concerns that migration imposes a burden on local infrastructure, Government could consider imposing an upfront levy on migrants.

The New Zealand Initiative