March 22, 2022

Net migration losses likely to increase

Stagnant wages and a cost of living crisis are starting to drive Kiwi workers away

The latest migration data released from Stats NZ suggests that New Zealand will continue to experience a negative flow of migration. And it is likely that the economy will suffer from a brain drain in the short-to medium-term. 

In the year ended January 2022, New Zealand is estimated to have had a net migration loss of 7,500 people. There was a net loss of 10,100 non-New Zealand citizens, and a net gain of 2,600 New Zealand citizens. The first graph below indicates that the Covid-19 pandemic has caused a large disruption to migration, and has changed the country’s migration pattern. Since the year ended June 2013, the country had been experiencing a positive, and generally increasing, trend of migration. 

Since the year ended March 2021, the country has experienced negative net migration measured on an annual basis.

It is undoubted that the border closure to new migrants has been a significant driver of this negative trend but, more recently, the loss of purchasing power due to stagnant wages and high inflation is starting to push workers overseas.

Source: Statistics New Zealand

The second graph shows that in the last two months the net number of New Zealand citizen migrants has been negative. This is likely to become an established trend because, as was mentioned in the latest Summer Bird’s Eye View, the country is experiencing a fall in real wages, and the gap between wages and inflation is trending towards further widening. 

It is expected that a large number of Kiwi workers will jump over the Tasman to look for better opportunities in Australia

Also, with the borders now opened for Kiwis, it is expected that the net migration data in the coming months will trend downwards, as Kiwis feel more confident to move overseas knowing that they can come back at any time. Meanwhile, the borders are not yet opened for non-citizens. And it is likely that, when they do open, the number of new arrivals in the country will not be enough to compensate for the number of departures, as migrants could look for better opportunities elsewhere. Overall, therefore, it is likely that the net number of migrants will trend downwards.

Source: Statistics New Zealand

Furthermore, the third graph shows the migrants’ age breakdown.

The largest contributors to the negative net migration values are working adults, with most of them being in the first half of their working lives

While it may appear that the trend is shifting, and the net migration value is moving towards a positive value, it could be argued that this is a false impression as there is generally less migration movements in January, and the data is not seasonally adjusted. Also, the cost of living crisis has been worsening since December, with soaring petrol prices which are likely to have increased inflation in the first quarter of the year. Therefore, if there was already a significant number of working adults leaving the country in December, the number is likely to increase in the coming months because economic conditions have worsened.

Source: Statistics New Zealand

In addition the country is experiencing a brain drain because it is mainly younger workers who are leaving the country, many of whom are skilled. This is especially worrying because New Zealand has now reached a record low unemployment rate of 3.2 percent, and there is a shortage of workers in strategic industries for the economy. Therefore this economic environment, in which there is a net outflow of migrants, could hinder the economic recovery from the Covid-19 shock, as firms will struggle to offer competitive employment opportunities and find skilled workers.