From a 19,000 annual net outflow in early 2022 to a net inflow of 72,000 – the latest MBIE migration figures are truly a surge of breakneck speed. And the peak is likely to be 95,000-100,000. Kiwibank had forecast migration this year would exceed 36,000

Like pre-Covid trends, most of the new migrants are arriving from India, Philippines, China, and South Africa.

More than 27,000 Kiwis also returned home, but that was more than offset by the almost 54,000 Kiwis leaving the burrow. As is typical, a net loss of 26,100 New Zealand citizens over the past year was recorded.

“On a quarterly basis, we believe we’re nearing peak net inflows,” Vergara says. 

Annually, net migration is still climbing and while the country is on track to hit 95,000-100,000 later this year, it’s largely baked in, she says. “Given the big gains over the past few quarters, we’re more than halfway there.”

Vergara expects net migration to ease back to about 35,000-40,000, which reflects tighter immigration settings and strong competition from other developed countries for skilled migrants.

“Just as spectacular as the rise in migration, so too the fall back to pre-covid levels will likely be,” she says. 

Increase in demand

Previous booms, particularly in the early-mid 2000s, caused a much more significant increase in the demand for goods and services.

Vergara says the same will play out – to some extent. “Yes, more people means more of everything including the need for more houses,” she says. “In fact, we are already seeing tentative signs of recovery in the housing market, as migrants play a larger role. And all of this extra demand typically means more inflation.”

However, Kiwibank economists don’t think this boom will be as inflationary as one might expect.

Principally because rising net migration is helping to increase the capacity of the economy – more than it is adding to aggregate demand.

Migrants are a fountain of youth, and employment, Vergara says.

“The boost in labour supply is plugging the staffing gaps that have long-plagued firms in this Covid era.

“Large gains in net migration also act as a weight on wage growth. Because migrants generally turn up and accept the going wage rate, and they are now arriving as demand for labour is beginning to soften”

She says first and foremost, net migration is helping to cool the inflationary pressures stemming from the labour market. 

“We think the addition to supply (labour) that comes with a gain in migration will likely outweigh the addition to demand. And on balance, that generates less inflation pressure than seen in previous booms,” Vergara says.

The question for the RBNZ is whether the migration boom will justify further rate hikes.

Vergara doesn’t think so. “We expect to see migrant flows settling back to pre-Covid levels.”