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.
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
Bernard
Sorry landlords, it's tough love, can't meet the promise, won't apologise.
There’s a rule of thumb for calculating the doubling time for anything subject to compound growth, divide 70 by the growth rate. So at a rate of 2.8% we can see that the population would double in only 25 years. I feel this would horrify most given the already parlous state of our infrastructure.
even more so when you think it is you and I that are paying for their infrastructure! National speaks of free riders - the biggest subsidy/free rider going in this little economy of ours is the one funding population growth.
Also our wealth is largely dependent on our ability to export - and that ability to export has functionally flatlined while our population has doubled so our ability to pay for our imports (cars petrol smartphones overseas holidays clothes etc has roughly halved on a per capita basis over the past three decades. Our ability to export has also been hammered lately by a substantial drop in export earnings - ask a farmer how things are going - they are remain the foundation of our economy - the answer will be- NOT GOOD! And that is where the rest of the economy is heading.
Our housing crisis is a direct consequence of too many people arriving here in too short a time frame and most of our other problems arise from the same cause.
Yep. But no one is talking about it on the big tv networks or newspapers. Strange.
Established media and their digital usurpers are very selective on holding truth to power as blatantly evident in coverage on the Gazan genocide and 100 plus years of human rights atrocities leading up to it.
Liam Dann is the only one I can think of who was mulling over it for NZ Herald the other day. But that’s paywalled, so only a smallish specific group of ppl will see.
Is it like covid or climate in a way, if it doesn’t immediately impact you or your family, it doesn’t exist?
Pleased that you clarified the 'universal' pension at 65 years. In 20th C, the 'old age' pension was available at 60 years but was means tested. Anyone could claim 'universal' pension at 65 years. When the age of eligibility was raised from 60 to 65 over time, the result was all retirees were now on 'universal' non means tested pension.
It should be recalled that there was a separate taxation fund to pay old age pensions in mid 20thC.
My memory is that disappeared into Consolidated Gov coffers during Muldoon years.
If my memory is inaccurate love to know.
Nearly 50,000 beneficiaries of NZ Superannuation are collecting $1.1 billion a year in benefits while also getting more than $100,000 each from jobs, investments and private pensions.
Yet Super is not enough to live on for the beneficiaries who really need it: retired jobless renters with no assets and no other income.
We need to stop thinking of NZ Superannuation as an entitlement for everyone who reaches 65, and instead recognise it as a universally available social welfare benefit to spare have-nots from living their final years on the streets in poverty.
Many people, regardless of ethnicity, are broken and unable to work long before they reach the NZ Super qualifying age of 65; and of those who survive till then, many will be renters with no savings.
NZ Super needs to be reconceived to be aimed at the person who reaches 65 with no home, no savings, and no job or possibility of work.
The single-person-living-alone benefit for 2023-24 is a net $496 a week.
Massey University's FinEd Centre reckons that person really needs $826 a week for a no-frills 'metro' retirement (presumably in Auckland) or $690 a week in the provinces. Both much more than $496 a week.
The single-person-living-alone weekly after-tax benefit needs at least to be increased from $496 to that 'provincial no frills' $690.
That would still leave the retired renter struggling to pay the bills, especially in Auckland.
But it would be a further bonanza for those 50,000 beneficiaries already getting $100,000 a year from other sources.
Something needs to change.
We need to increase NZ Super to be enough for the retired poor to live on, yet, to keep it both universally available and affordable, discourage those who have no need of it from signing up for it.
That will require reintroducing some form of the surtax or surcharge on other income that was abolished in 1998. And that is something that can only be accomplished by the major parties, National and Labour, agreeing to do it together.
https://figure.nz/chart/2eIStXKBWssxMIze
The repeated calls to lower the NZ Super qualifying age for Māori do point to an argument for restoring a means-tested and health-tested pension at 60, to tide the broken over for five years till they qualify for the main Super at 65. On the other hand, a qualifying age of 60 would arbitrarily favour a disabled 60-year-old over a disabled 59-year-old. Perhaps what is required is a harder look at invalid benefit rates for everyone.
The assertion that some groups have a right to early Super because of a lower life expectancy is nonsense: NZ Super is a social welfare benefit to provide a dignified retirement for the living, regardless if they get it for one year or thirty.
https://www.infometrics.co.nz/article/2022-04-lower-super-age-maori
Just a quick reminder that, before Erica Stanford was making breathless drama out of how just how bad the mess left behind by the previous government is, she was a reality TV producer.
I was quite impressed by her in-depth grasp of her portfolio. I'm not sure I'd want to work for her, though - looks like she takes no prisoners.
So was I.
But there are lots of examples of people who are very very sincerely, and persuavively, catastrophically wrong !
Haha, indeed, those two things are not mutually exclusive - any 'good' modern politician works their staff for their own ends ;-)
Yes her knowledge of the term "equilibrium" leaves much to the imagination. Big word for an immigration minister - Net migration of zero is her aim then?
I have heard that she is most capable and smartest of the Nats can think analytically and is likely to be next Nat leader if it was based on ability.
The state of the nation speech is rehearsing the justifications for austerity for bottom feeders to pay for the absolutely necessary corporate welfare for landlords and income tax reductions for those on higher incomes.
"absolutely necessary"
I presume that is cynicism/sarcasm.
Cynicism on my part, the received truth and natural order of things as far as Luxon, Willis and Seymour are concerned (the strict father frame).
"understand what our absorptive capacity is"
This sounds pretty close to an estimate of how much we can grow.
Are we finally about to get an official population growth estimate/target?
I'm not holding my breath because Immigration Ministers in the past haven't given estimates, and she could still walk it back, but I'd be impressed if she went there.
and most of our former immigration minsters are now making a fat living as immigration consultants! One has to wonder what that says to the rest of the world? In many nations that would be considered a corrupt practice
The problem with the absorb-ative capacity is I don’t feel we’ve absorbed the previous decades growth to deal with the current growth.
Not sure who dreams up the corporate speak but pretty certain absorptive capacity directly proportional to infrastructure investment so I think it is safe to deduce NZ has had negative “absorptive capacity” for some time.
Absorptive capacity was invented as a term by the Productivity Commission in its report into immigration. The Commission is no more, but the term lives on...
Pretty certain productivity also a key variable for “absorbative capacity” so you would think diddy David’s abolition of the commission to fund his cowboys charter directly reduces said capacity
The rhetoric sure smells a lot like Rogernomics/Ruthenasia...
Interested in this statement ex RNZ this morning Bernard, reality or marketing?
Willis said the previous government had changed the way they measured the country's debt and it resulted in making it look about 20 points lower than what it should have been.
"It's now heading to about 44 percent of our GDP - that's really high by New Zealand's historic standards."
I can't hear anything she says anymore without imagining her smug, glinting-eyed, amusement as she pronounces about how many people she's going to turf out of public sector jobs and off social welfare, in order to reduce some numbers on the right-hand side of a spreadsheet somewhere!
My pet theory, there is a stash of mad max cosplay kit in the Beehive basement Nicola and David Seymour are frothing to get onto the post austerity apocalypse streets of Wellington in
Thanks Mr Anderson. She's talking about the gross debt to net debt change a couple of years ago. It is about 10-20% of GDP depending on the size of the NZ Superannuation Fund. The 'historic standards' are from before NZ Super Fund. It is worth $70.7 billion and very liquid. It can't be ignored.
Cheers!
I realise this is off point but I can remember when Argentina was one of the richest nations in the world. Now it is a basket case and it has a nutty economist - in the style of Luxon - as its leader. Now do we really want to go down that road?
Unfortunately Patricia we have had four decades of nutty economists taking us down the Argentinian path.
"in the style of Luxon" - obviously you don't mean style as in hairstyle - Luxon and Milei are polar opposites in that respect!
'Hot-bedding' like the awful trend towards hot desking has always been around for shift workers. I have a friend who regaled me of a particularly grim year he shared a single mattress in a cupboard under the stairs (Harry Potter like). He had it for nights and a nightclub worker had it during the day. It was $20/week in the 90's in notoriously cold and damp Aro Valley. I'd hate this to become a regular occurrence in NZ. I still have the asthma that started in a mouldy student flat 25 years ago.
My partner's brother slept on a camp mattress under the stairs in Queenstown pre-covid, desperately trying to find somewhere to live as a teacher. They're QT locals, or at least they were until they couldn't afford to move home after university.
Don't necessarily agree with her but Erica Stanford struck me as reasonably competent.
Thanks Bernard.
The second and third paras of TL;DR is a wonderfully concise explanation of how we got to be paddlesless up this particular creek with this particular economic situation.
And the remedy certainly isn’t lower tax rates for the mythical squeezed middle.
Thanks Dave.
until all New Zealand citizens and residents are properly housed then any immigration is too much (with possibly a few exceptions eg medical practitioners)
And builders.
am dubious about that
the number of building consents being issued is decreasing
but if Kainga Ora commenced the rapid construction of 200,000 public/state houses then yes.
but builders from overseas would need to be overseen to ensure compliance with the Building Act and the Building Regulations.
How can a government expect to be taken seriously when it talks so emphatically of retaining a universally applied guaranteed income for anyone over the age of 65 - no matter their level of income - And in the very next breath declare an all-out-war on anyone under the age of 65 who is disabled, disadvantaged and poor?
In 1964 they held a “meeting planning for the million” conference to mark the celebrations of Auckland reaching 500k residents. Tellingly, Dove Myer Robinson gave the opening speech.
Population figures can be tricky to deal with. When calculating population growth a shift of one year in the range can change the growth rate quite a bit. Thus, "the past 20 years" is a bit too vague for me. Furthermore, an "average" can only be a single number; it is not a range. When you say that population growth in NZ has "...averaged 1.5-2% per annum for the past 20 years you seem to be trying to combine both a range and an average. Population growth over the past 20 years of census counts (1996-2018) has averaged 1.4% per year by my calculation. The range over this period (5-year intercensal averages) has been from 0.8% (1996-2001) to 2.0% (2013-2018). Annual fluctuations are wider than this. Over the period 2019-2023 (which includes the COVID-19 years) growth ranged from 0.1% to 2.2%. Is growth of 2.8% "sustainable" in an economic sense? Unlikely. Another "rule of thumb" that demographers use is that 2% and above constitutes "rapid" population growth. This is the point at which population growth puts a brake on development. This is established in theory and by empirical example. Some demographers, like Goldilocks, prefer growth to be not too hot (fast) and not too slow (cool). NZ's past growth of 1.4% over several decades is "about right", but as you suggest, this would only be true if infrastructure investment had been maintained at a decent rate. Given our infrastructure deficits, we need at least a decade of 1% population growth growth. Assuming that natural increase remains at around 19,000, that means that net immigration could not exceed 33,000 per year. That is without taking into account the age distribution of migrants.
Tough love?
This is the way abusers talk. 'I'm doing this [hurting you] for your own good.'
Classic schoolyard bullying behaviour, pick on the vulnerable to make yourself look powerful. It is even more repugnant from smug self satisfied adults in positions of power.
Two things. If they are doing the "tough love" stuff, can they say how many people are "not playing ball"... as the rhetoric suggests 70,000 people.
Secondly for all the additional support and check-ins from MSD, how much is the MSD budget going to be increased to manage the huge increase in workload?
I'd never thought about it before, but I'd honestly never considered someone in the military who goes abroad to fight a war or go on assignment to have emigrated. Sure they're not in the country during that time, but they are expected to return and I would not have imagined they were counted in immigration stats.
FYI, I've opened this up for public reading and listening after it got over 50 likes from paying subscribers.
TOUGH LOVE
A good place for Luxon to start is to start his tough love is by divesting himself of his portfolio of houses.He probably gains more in capital gains than all the recipients of his proposed tough love COMBINED.
The ‘ rules based law’ makes it perfectly legal.
Bernhard, I have another example of the renting crises for you. We recently put our home up for rent on a fixed term basis, only 7 months, and we had several families with school aged children interested in our property that were not currently living in our area. They all cited the reason for their interest being that they were struggling to find anywhere to rent in their area. It also helped that we allowed dogs which is apparently another massively underserved segment of the rental market based on applications.
Having kids move schools due to lack of rental property availability or affordable housing availability is a problem I wish the government would acknowledge and focus on solving. I’d like to see it part of their list of “outcomes”.