Dawn Chorus: Migration surge seen adding to inflation and interest rate pressure

Westpac has revised up its rent and house price forecasts (and its peak OCR forecast), citing population growth as a factor. Photo: Lynn Grieveson / The Kākā

TL;DR: While some have argued the Government’s fiscal policy is one factor pushing up interest rates, a bigger Government-driven boost to short-run inflation this year has been hiding in plain sight: a loosening of migration settings creating another record-high surge in population growth.

Westpac NZ’s economics team focused attention on migration policy as a cause of higher inflation and interest rates (for now) in its economic overview published this morning, in which it increased its peak OCR forecast to 6.0% from 5.5% and revised up its house price and rent forecasts, citing a 2.4% rise in the population for an increase in inflationary pressures.

Elsewhere in news about our political economy this morning:

• a poll showed voters like Chris Hipkins’ performance much more than Christopher Luxon’s;

• Luxon wants councils to borrow more long-term to pay for infrastructure;

• Christchurch Hospital’s surgery waiting list has blown out to six months;

• Electricity retailers are failing consumer care guidelines for over 40% of customers; and,

• Auckland Council is about to lay off 400 staff to cut costs.

Paying subscribers can see and hear more analysis, detail and charts about the migration surge’s inflationary implications below the paywall fold and in the podcast above, as well as more on the other key news this morning in Aotearoa’s political economy.

Migration actions have inflationary consequences