Migration surge reduced inflation, says Orr

Record high net migration in 2023 produced a net detraction from inflation because of a surge in labour supply, but the effects may be more inflationary this year. Photo: Lynn Grieveson / The Kākā

TL;DR: Te Pūtea Matua (Reserve Bank) Governor Adrian Orr told me in an interview yesterday that record high net migration in 2023 produced a net detraction from inflation because of a surge in labour supply, but the effects may be more inflationary this year as those new workers start spending on rents, food and other items.

He also reiterated that the removal of the RBNZ’s mandate to ‘support maximum sustainable employment’ by the incoming Government would in practice mean little change to the central bank’s operation of monetary policy. That’s because inflation fighting always trumped the employment mandate anyway in the previous remit, and the bank had also not faced a trade-off between inflation and employment.

Here is the full When The Facts Change interview as published this morning via The Spinoff, and here via Spotify and Apple Podcasts

Elsewhere in the news in Aotearoa-NZ’s political economy at 9 am:

• PM Christopher Luxon is claiming $52,000 in accommodation costs from taxpayers for living in his own apartment in Wellington, making him the first PM in at least 34 years to claim the payment because other PMs either lived in Premier House or were based in Wellington, Newsroom’s Marc Daalder reported this morning. Luxon says he claimed the apartment rent as an expense because Premier House needed repairs.

• WorkSafe is cutting spending on $15 million worth of workplace safety programmes, including a successful $1.2 million forestry safety project, RNZ’s Phil Pennington reported this morning.

• Amazon Web Services has quietly put the consent application for the construction of a $7.5 billion data centre at Westgate in Auckland on hold after stormwater discharge issues were identified, Jonathan Milne reported for Newsroom Pro-$$$ this morning.

• KiwiRail reported a $407 million loss for the first six months of its financial year yesterday, after writing off $442 million in costs from the iReX Interislander ferry and terminals project cancelled last year by the new Government..

• Associate Finance Minister David Seymour has asked officials for ‘value-for-money’ reviews of the retaining TVNZ and other State Owned Enterprises, Newsroom’s Jonathan Milne reported yesterday. Seymour said he hadn’t discussed asset sales with Cabinet. Yet.

• Newshub reporter Michael Morrah says a group of senior staff want to propose that Warner Brothers Discovery keeps a stripped-down version of Newshub’s 6pm news, the NZ Herald’s Tom Dillane and RNZ’s Finn Blackwell reported last night.

• Judith Collins has handed over her powers as Attorney General for ‘fast track’ consenting legislation to Justice Minister Paul Goldsmith, as disclosed in the Gazette yesterday, because of an undisclosed conflict of interest, The Post-$$$’s Thomas Manch reported this morning.

• A Te Kuiti grandmother, who has had the bottom half of her body amputated, fears she will be left homeless after ACC told her they will no longer pay for her temporary accommodation, Newshub’s Amanda Gillies reported last night.

• Waikato Hospital has apologised for a privacy breach involving dozens of patients, NZ Herald-$$$’s Nicholas Jones reports this morning.

• The cost of Wellington Water’s upgrade of its Te Mārua Water Treatment Plant in Upper Hutt has risen by $40 million to $90 million, RNZ’s Nick James reported this morning.

• World Vision research into prices of a basket of 10 common food items in 67 countries, including rice, bananas, chicken, tomatoes, eggs and oil, found prices in Aotearoa-NZ rose 56% in 2023 to NZ$78.32 from NZ$50.16 in 2022. The price of the same basket in Australia fell 29%. (Corrected from rose)

• Fletcher Building has appointed Miles Advisory to oversee the sale of its Australian plumbing supplies business TradeLink, the AFR-$$$ reported this morning.

Overseas, overnight:

• Vladimir Putin gave his most direct warning yet he was prepared to use nuclear weapons against Europe. Reuters

• Israeli forces shot dead more than 100 Palestinians as they waited for an aid delivery overnight, Hamas officials reported. Israel said many of the victims were run over by aid trucks. Reuters

• Key US inflation figures for January were in line with market expectations, helping drag US bond yields a few basis points lower and lifting US stocks about 0.3%. That keeps the pressure on for lower fixed mortgage rates here. Reuters

• Voters in US swing states across every major demographic group described Joe Biden as too old to be President, while they saw Donald Trump as stronger, more mentally fit and healthier than Biden. Trump is ahead in most swing-state polls. Bloomberg/Morning Consult poll and X

Migration had ‘net downward impact on overall inflation’