Matt Nolan

A note: Migration and the GFC

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There have been claims by the Labour party that rising departures from NZ are the fault of the National party, and that the increase during their tenure was due to the global financial crisis (GFC).  Now this is a little bit untrue in terms of the way it is framed, I’ll just quickly point that out and then have a little chat regarding why we might be seeing departures rise, and whether it is really a policy relevant issue in of itself.

Now, lets think of the rough timing around the financial crisis and recession in terms of NZ:

  • July 2007:  First signs of undue stress in US sub-prime market – leading to rising risk premiums.
  • December 2007:  NZ drought
  • March 2008:  Bear Sterns failure
  • Up to July 2008:  Massive spike in petrol prices
  • September 2008:  Lehman Brother’s failure – true global financial crisis begins.

Phil Goff is right that all this stuff happened while Labour was in power – the election was in November 2008.  That is a tough environment for governing parties and individuals – so that is tough.  However, the massive drop in domestic demand occurred in the December and March quarters of 2008/09 – when National had just come into power.  If we were going to say that poor economic conditions were the driver of migration flows we should have seen issues come to a head at that point.  But …

Thanks you Stats NZ for the data.

We can see here that departures plummeted during late 2008/early 2009 (note that the line corresponds to the date of the GFC).  This is of course because it is “relative” economic conditions that matter for people moving – and the global financial crisis hit everyone, including Australia to start with.

There was a pick up in departures during 2008, when NZ was in recession.  However, there was also a pick up in departures during 2007, when NZ had (near term) record low unemployment and a massive increase in its terms of trade.  As a result, it really isn’t clear that Labour can really blame the recession for rising departures per see – and I don’t really think they should have to defend themselves regarding these types of movements.

What was driving these flows

Lots of things would have been driving departures from NZ.  However, one of the big ones is the Australian unemployment rate:

And thank you ABS for your data!

At the start of the global financial crisis the Australian unemployment rate rose sharply.  With no jobs available in Australia, people were not interested in heading over – and so they didn’t.

As the Australian labour market became tight again, people started heading over there.  Now, the relative unemployment rate is very important here of course – the fact that unemployment in NZ is elevated is relevant.  But in of itself, the fact that the Australian labour market is getting tight (especially for skilled labour) has provided people opportunities to head over and try something new.

And this is the kicker, people are heading to Australia, into work, because it is in their interest.  Unless we believe that these people leaving NZ has a “external cost” on the rest of society then what is the big deal?  For some reason when people leave the country we decide to value them less – and that doesn’t really make sense to me.

Now we could say that rising departures are a sign of implicit issues in the NZ economy, sure.  But, we need to identify what we think the issues are and why – appealing to the departure numbers in itself does not do this.  Furthermore, rising departures may have nothing to do with issues in the NZ economy – it could be that other nations are experiencing extra luck, or that New Zealander’s feel more comfortable traveling now the GFC is over, or even that demographic shifts have seen a greater number of “potential movers” appear in the NZ population.

Ultimately, both parties are guilty of this sort of behaviour – National did it constantly in opposition.  But given the policies both parties have put in place during their respective terms I do not think it is fair for either party to “blame” the other for the number of people permanently leaving New Zealand permanently – if blame should even be attributed in the first place.

Note:  Migration is an area where I do a lot of analysis – but I can’t go into much more detail than the basics given that it is part of my job.  If you wanted more detail in terms of numbers then the Stats NZ site is great, as is the immigration site – and if you want analysis you could always subscribe to the Infometrics service 😉