The Kākā by Bernard Hickey
Is 2.8% per year population growth too much?

Is 2.8% per year population growth too much?

Stanford reviewing ‘unsustainably’ high immigration and wants policy to match ‘absorbtive’ capacity of economy and infrastructure; Luxon plans ‘tough love’ for ‘fragile’ nation

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TL;DR: The Government is reviewing migration settings that produced 2.8% population growth last year and is looking at a longer-term strategy of matching population growth to the ‘absorbtive capacity’ of Aotearoa-NZ’s infrastructure.

Our population grew last year at its fastest rate since 1947, when large numbers of troops returning from World War II boosted the figures ahead of near 2% per year growth during the baby-boom years of 1947 to 1967. Governments of both the left and right invested heavily in public infrastructure such as water, roading and power networks from the 1940s to early 1970s, paid for with sharply higher income taxes, land taxes and estate duties. Government investment as a share of GDP ranged from 10-15% over that period and income tax rates were over 50% for many.

Tax rates were cut from the late 1980s onwards on the assumption of low-to-no population growth and less need for new infrastructure. Land taxes, estate duties and taxes on capital gains were dropped. But population growth has actually averaged 1.5-2% per annum for the last 20 years, with infrastructure investment at less than half the rate of the baby-boom years (investment was 5-10% of GDP), despite population growth being only slight less from 2004 to 2024 than over the 1947 to 1967 period.

Too many people to absorb?

Migration review - Immigration Minister Erica Stanford told Jack Tame in a Q+A interview aired yesterday that last year’s record-high net migration of 126,000 was not sustainable, although it was likely to fall as more temporary migrants with expiring three-year work visas began to leave. But she said migration settings were being reviewed and she had asked officials to look into a General Policy Statement on immigration and population that considered the ‘absorbtive capacity’ of infrastructure.

"I can see that net migration is starting to shift - people are starting to leave and we're going to get that equilibrium back. But in the long term, is this sustainable? No, it's not."

“What I want it to do is give us a planning framework, understand what our absorptive capacity is, and make sure that our hospitals, our schools, our infrastructure, are working with immigration so that we have better long-term planning." Erica Stanford via Q+A

No more ‘free rides’ from ‘tough love’ Luxon

Tough love? - PM Christopher Luxon gave a ‘State of the Nation’ speech to National Party members in Auckland yesterday, saying it was time his Government delivered ‘tough love’ to a ‘fragile nation’. He said beneficiaries who didn’t ‘play ball’ with offers for work would find ‘the free ride is over.’ He also said the Government had discovered Kainga Ora planned to sell 10,200 houses to reduce its debt and that transport spending needs were $200 billion above the funds put aside by the previous Government.

“I have to level with you New Zealand and say - the state of the nation is fragile.

“I will not apologise for tough love. 

“We need to get the public finances back in order.

“That means a return to the orthodoxy of tight budgets, careful stewardship of public money, and a determined focus to keep or return the books to surplus.

"Strong public finances aren’t enough of course to deliver a strong economy in their own right – but they are a critical prerequisite.

"We can’t build infrastructure if we can’t be trusted to borrow money. Businesses can’t attract investment if there’s no confidence in the value of our currency.” Christopher Luxon in his ‘State of the Nation’ address.

‘Are we there yet? No.’

High for longer? - Reserve Bank Governor Adrian Orr gave his first speech of the year in Hamilton on Friday, saying core inflation pressures had fallen, but were still 4% and above the bank’s medium term target of getting inflation down to around 2%. Notably, he used charts for core inflation in his speech that showed significant upwards revisions over the past three years.

“While these declines in core inflation are moving us in the right direction, tackling the tail end of these persistent inflation pressures in the domestic economy remains key to achieving 2 percent inflation. Just how persistent these pressures might be depends on how factors, such as capacity pressures and inflation expectations, evolve going forward.” Adrian Orr in a speech to the NZ Association of Economists.

Adrian Orr speech

Housing market not back on track yet

Unanswered questions - Independent economist Tony Alexander published the results of his February survey of mortgage brokers on Friday, which showed the housing market not yet to really fire up because of uncertainty about the RBNZ’s Debt to Income (DTI) limits and the future of interest rates. Rental property investors returned as buyers with a flurry in late 2023 as the new Government was elected, but that enthusiasm has waned because of fresh uncertainties.

“Some buyers are awaiting much greater clarity on how the debt to income (DTI) regime will work and where interest rates are headed. New confusion has appeared in this space.” Tony Alexander in commentary on his February survey of mortgage advisors.

‘Will you share a bed with me? I’m clean. Just $195/week’

Stuff’s Nadine Roberts reported yesterday about an ad placed on Facebook Marketplace last week (since retracted) for someone to share a bed with a stranger for $195/week in Queenstown.

It’s unclear if anyone took him up on his offer, and for those of you who think it can’t have been genuine - think again.

One female who thought the ad must have been incorrectly worded, inquired, and was told she would be sharing a bed with a man “who was always busy with his work.”

The man’s Facebook profile says he is a chef.

The woman didn’t take him up on the offer. Stuff’s Nadine Roberts

Centre-right wins tight by-election in Wellington

The centre-right candidate in the weekend by-election for Wellington City Council’s Pukehīnau-Lambton ward, Karl Tiefenbacher, beat Green candidate Geordie Rogers by 164 votes with 564 special votes still to be counted. The by-election is being held because current Green councillor Tamatha Paul won the Wellington Central seat in the General Election.

The result, if confirmed, would narrow the centre-left majority on the Council to just one or two votes, making it more precarious and reliant on the casting vote of Green Mayor Tory Whanau.

Timeline cleansing nature pic

Braided waterway on a small scale

Ka kite ano


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The Kākā by Bernard Hickey
The latest daily snapshot of the news, detail, insight and analysis on geo-politics, the global economy, business, markets and the local political economy for citizens and decision-makers of Aotearoa-NZ.