Australia’s weak labor market causes migration decline in New Zealand

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Dr writes that weak labor markets in Australia and New Zealand have led to a significant drop in net migration of New Zealand citizens. Abul Rizvi.

TRADITIONALLY, net immigration of New Zealand citizens to Australia has been largely positive.

But if the gap between Australia’s and New Zealand’s unemployment rate remains at current levels, net migration of New Zealand citizens to Australia may be negligible or even turn negative.

For most of the decade up to 2013-14, net migration of New Zealand citizens to Australia averaged between 15,000 and 30,000 per year, reaching 44,690 in 2011-12 (see Table 1).

(Source: ABS, Migration)

In that year, New Zealand citizens represented more than 19% of net immigration and more than 12% of population growth.

But net immigration from New Zealand fell sharply over the next two years. In 2014-15, New Zealand citizens contributed only 4,670 to net immigration of 184,030. This decline was the main reason why net migration dropped by almost 50,000 from 2012-13 to 2014-15.

Net immigration of New Zealand citizens has since remained well below 10,000 per year.

But why would that be?

The key driver is the relative state of the labor market.

Prior to 2013-14, New Zealand unemployment was consistently about one percentage point higher than that of Australia (see Chart 2).

(Source: Statistics New Zealand and ABS)

Basically, strong labor markets attract people. Weak labor markets do not exist.

Since 2013-14, New Zealand’s unemployment rate is about one percentage point lower than Australia’s.

And while Australia’s unemployment rate is likely to drop over the next few months as the effects of lockdowns ease and international borders reopen, it’s unlikely to drop to what is currently around 3.4% in New Zealand.

It should be noted that New Zealand’s low unemployment rate is not a low participation rate factor.

In fact, New Zealand has a significantly higher participation rate than Australia (see Chart 3).

(Source: NZ and ABS Statistics)

In 2019-20, New Zealand citizen inflows were 22,400, while net inflows were 1,200 and exits were 21,200 – the lowest in decades.

While this was partly due to the pandemic, if the substantial labor market gap between the two countries persists, we may see New Zealand citizens leaving rather than arriving.

A weak labor market could also mean that we could revert to the net outflow of Australian citizens.

(Source: ABS)

While the net movement of Australian citizens was almost 40,000 positive in 2019-20, we had at least a net outflow of Australian citizens in the previous 15 years.

Net outflow of Australian citizens peaked at negative 25,880 in 2014-15, when Australia’s unemployment rate was over 6%.

This highlights the fact that the Treasury’s long-term forecast of net overseas migration, averaging 235,000 per year, would be very difficult to achieve without a consistently strong labor market.

Dr. Abul Rizvi NS Independent Australian columnist and former Assistant Secretary of Immigration. You can follow Abul on Twitter @RizviAbul.

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