Migration figures point to slowing economy

John Miller

Net migration plunged 15 per cent in the year to January, Statistics New Zealand said yesterday, providing a fresh portent of the slowing economy.

Meanwhile, visitors were on average spending four days less in New Zealand than they did a year ago, reflecting falling foreign student numbers and possibly the soaring kiwi dollar putting the brakes on the tourism sector.

The net migration figures, showing the number of long-term arrivals in the year to January falling from 39,000 to 33,000, are a key indicator of future domestic demand, particularly the housing market.

"Today's data support the expectation of slower economic growth rate in 2004 and 2005, compared with 2003," ASB Bank said.

"While net migration is expected to remain positive in 2004, the lower level will provide less impetus for domestic demand."

Long-term arrivals exceeded departures by 4000 in January 2004, compared with 5600 last year.

Net migration in January was 1000 higher than December, though economists warned against reading too much into the figure as tough new immigration rules introduced last July will continue to bite.

Deutsche Bank said the month-on-month rise, if sustained, would reinforce the Reserve Bank governor Alan Bollard's bias to lifting interest rates.

A thin majority of economists expect the bank to lift the official cash rate by 0.25 of percentage point to 5.5 per cent later this month, according to a Dow Jones poll released yesterday.

"Over the coming months we expect gross departures to resume their recent upward trend," Deutsche Bank said.

"However given the importance of the weaker migration as a driver of our forecasts of reduced activity in the housing market, we will await the February data with considerable interest."

ASB said the figures indicated up to 20,000 long-term arrivals in the coming 12 months.

"This is lower than the Reserve Bank had been forecasting back in December. However, it is not weak enough to suggest a radical revision to housing and GDP forecasts."

Tourism remains strong, with short-term visitors to New Zealand rising by 68,000 in the year to January to 2.13 million. More visitors came from Australia, the United Kingdom, the United States and Germany.

These rises offset falls in Asian visitor numbers caused by health fears and poor publicity over the English language schools.

Economists also blamed a drop in the average length of stay from 28 days in the year to January 2003 to 24 days in January 2004 to falling foreign student numbers.

The soaring kiwi, now flirting with seven-year highs against the greenback at US68.8 cents, may also take some of the blame.

"(Tourist) spending growth, which was not disclosed, is probably growing at a slower rate, but nonetheless tourism is still making a positive contribution to GDP," ASB said.

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