ANZ: Immigration “was never a sustainable source of growth”

ANZ economists believe there is a “slim” prospect of a population-driven recovery for the New Zealand economy given the weak outlook for migration. They also claimed that immigration “was never a sustainable source of growth” anyway:

This crisis has turned New Zealand’s recent model of migration-driven growth on its head… Once borders reopen, we expect net inflows to rebound, but to lower levels than before the crisis (figure 1)…

Migration-induced population growth has been one of the most dominant drivers of economic activity in recent years, with per capita GDP growth trailing well below the headline measure (figure 4). This was never a sustainable source of growth.

Overall, the weaker outlook for migration means that the prospect of a population-led recovery is slim. That will put the burden on domestic stimulus and productivity. So far, we’ve seen nothing on the policy front to convince us that productivity is about to take the reins, so expect a pretty ho-hum performance on the other side.

Meanwhile, a new report for the New Zealand Productivity Commission claims that mass immigration has distorted the economy and wrecked productivity:

The substantial net migration inflows that New Zealand has received over the past 25 years has been a strong source of support for headline GDP growth, but has created a series of distortions and pressures in the New Zealand economy: infrastructure and cost pressures, greater residential real estate demand (with implications for allocation of investment capital), downward wage pressure that deters business investment, as well as upward exchange rate pressure. An explicit immigration policy that was focused on quality and filling skills gaps, with lower gross inflows, would create a more supportive environment for higher levels of international engagement by New Zealand firms.

Given the similarities between the New Zealand and Australian economies and immigration systems, these findings can be equally applied to Australia.