Auckland chokes on its own population ponzi

Advertisement

By Leith van Onselen

It is becoming abundantly clear that the New Zealand Government is following the Australian script of artificially pumping the economy with large numbers of migrants, in the process creating all kinds of pressures on infrastructure, congestion, housing, and living standards.

According to the permanent & long-term migration figures for October 2015, released today by Statistics New Zealand, there was a record net gain of 62,500 migrants in the year to October 2015, led by heavy net migration from India (13,117 net gain) and China (8,606 net gain).

Of the circa 120,000 permanent and long-term arrivals into New Zealand, 36,800 arrived on work visas, followed by 35,700 Australian and New Zealand citizens, 27,500 on student visas, and 13,900 on residency visas. Student visas, in particular, have experienced rampaging growth:

ScreenHunter_10471 Nov. 23 11.05
Advertisement

As noted in Interest.co.nz today, the surge in migrants will place an increasing strain on Auckland, in particular, where housing and infrastructure pressures are already acute:

The increased migrant numbers will put further pressure on Auckland’s already stretched housing market, with a net 29,010 new migrants intending to live in Auckland, however the actual number that settle in the city is likely to be much higher because a net 14,874 migrants did not state where they intended to live when they arrived and many of them are also likely to settle in Auckland…

Indeed, as reported today in the NZ Herald, Auckland’s traffic congestion is getting worse:

Advertisement

Auckland commuters travelling in along the Northern and Western motorways may need to allow more time as traffic slows to a crawl.

The New Zealand Transport agency said there was no specific incident causing the build-up, but said it had noticed morning congestion seemed to be getting earlier…

Funny that. Cram more people into a given area and congestion gets worse. Who could have known?

Ditto housing affordability in Auckland, which is quite frankly the pits, as noted in The AFR today:

Advertisement

…average house values in the city [Auckland] have jumped 70 per cent to NZ$1,079,473 in the past four years, according to CoreLogic.

Auckland house prices are now the second-highest relative to incomes among developed economies…

“This boom that we’ve had has been huge, it’s just been extraordinary in terms of the scale of the price increases,” said Shamubeel Eaqub, an independent economist in Auckland, who co-authored Generation Rent, a book on the decline of home ownership in New Zealand.

“For a young couple to buy a modest home in Auckland, it’s 60 per cent of their income on mortgage payments. We’re going to run out of fools to buy houses – it can only be the landed gentry.”

Meanwhile, New Zealand seems to be experiencing similar types of student fraud and foreign worker exploitation as seen in Australia. From Radio NZ:

Would-be students from India are lying on their immigration applications, misrepresenting their financial situation in order to get student visas.

A high number of fraudulent applications have been received at Immigration New Zealand’s India office from people applying for student visas.

Some people were misrepresenting their financial situation in order to get student visas, the office’s November newsletter about the student market said…

Indian students who arrived with too little money were at risk of exploitation that could harm the reputation of New Zealand as an education destination for foreign students.

Advertisement

More from the New Zealand Herald:

INZ [Immigration NZ] has been concerned for more than a year that large numbers of Indian students may be arriving in New Zealand more interested in exploiting the work rights available under student visas than the often low-value, vocational skills courses offered by many PTEs…

Indian students are overwhelmingly enrolling in sub-degree independent training provider and PTE courses…

Analysis by the Ministry of Business, Innovation and Employment has found that 51 percent and 62 percent of PTE and ITP international students respectively have been staying in New Zealand after completing their study. The trend is raising concerns that student visas are being used as a de facto way to migrate to New Zealand permanently, with Indian students far and away the most likely to remain in New Zealand compared to other sources of foreign students since 2009.

An yet even skilled migrants in New Zealand are struggling to find work, and are instead taking-up low skilled jobs:

Advertisement

Jaspreet Singh is allowed to stay in New Zealand permanently because the Government deemed his skills useful to the country.

But the only jobs the qualified mechanical engineer has found in three years here are unskilled and lowly paid.

The 28-year-old from India is one of thousands from Asia here under Immigration New Zealand’s main skilled labour policy, the skilled migrant category, with skills and qualifications that are not wanted here…

The New Zealand Government would do well to note the research of former RBNZ special adviser, Mike Reddell, who released a research paper claiming that New Zealand’s high immigration program had crowded-out (through higher interest rates and a high average real exchange rate) other productive investment, lowering living standards in the process.

Or research from the New Zealand Treasury, which questioned the merits of high immigration and recommended a reduced immigration intake in the event that the economy is unable to adequately cope with population pressures.

Advertisement

Or the 2011 report by New Zealand’s Savings Working Group, which argued that high levels of immigration in New Zealand had put upward pressure on inflation and interest rates, crowding-out productive sectors of the economy.

As argued many times on this blog, a big negative of high rates of immigration is that it places increasing pressure on the pre-existing (already strained) stock of infrastructure and housing, reducing productivity and living standards unless costly new investments are made, which in turn chokes-off other productive investment.

Trying to artificially juice the economy via never-ending high rates of immigration is likely to lower the living standards of the existing population. It’s not rocket science.

Advertisement

[email protected]

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.