(Bloomberg) — New Zealand needs immigrants to fill skills shortages, Prime Minister Chris Hipkins said, indicating he won’t seek to actively curb the record inflow of foreign workers if he wins next month’s election.
We are going to have to bring in skilled workers,” Hipkins said at the Bloomberg speech in Auckland on Wednesday. “What we’re going to focus on is making sure that the immigration we have is contributing to economic growth and not being used as a substitute for it.”
Hipkins, the leader of the ruling Labour Party, said governments “can grow the economy just by putting people in it, but that’s not going to raise our living standards”.
“We need to look carefully at our immigration settings all the way through to make sure it’s contributing to overall per capita growth,” he said.
New Zealand is experiencing near-record net migration after Hipkins tweaked the policy to address a damaging labour shortage that was driving up wages and costs. The surge in arrivals has so far helped to ease labour market pressures without creating new demand for housing, which could trigger a new wave of inflation.
Net immigration rose to almost 87,000 in the 12 months to June – close to its peak in March 2020 – led by a record 122,000 net foreigners entering the country.
Hipkins said immigration had probably peaked and would fall, but he refused to set a target as his party did when it came to power six years ago.
The population surge means Hipkins is walking a tightrope ahead of the 14 October election. His centre-left Labour Party has traditionally opposed high levels of immigration, campaigned for limits that would protect wages and been critical of how foreign buyers have driven up house prices.
“Labour was very clear that it wanted to build a high-wage, high-skill economy and that it wanted to do that through education, not by relying on high immigration,” said Robert MacCulloch, professor of macroeconomics at the University of Auckland. But “he was losing business support and also facing a weak economy. There seems to me to be a very clear link that the view was to relax immigration radically in order to please business and get the economy back on track.”
While businesses now say skills shortages are not their most pressing concern, the economy is not back up and running. Most forecasters, including the Reserve Bank, expect it to enter a double-dip recession in the second half of the year.
Easier lever
Using immigration as a tool to tackle skills shortages is an acceptable policy if it’s not overdone, says Craig Renney, chief economist at the Council of Trade Unions. For now, the labour market is strong enough to absorb the extra workers without driving down wages, he said.
“It’s an easier lever to pull, but the ease with which we can pull it shouldn’t lead us to overuse it,” he told Bloomberg. “We shouldn’t use immigration as a means to then just say we don’t need to do training, we don’t need to do workforce development.”
Renney wants the government to pay more attention to overall workforce planning and the role of immigration. This includes considering whether New Zealand has the skills to take on a particular project and, if foreign workers are needed, the capacity to integrate them into the community.
At Labour’s election launch last weekend, Hipkins said his government would extend free dental care to everyone under 30. But the country would need to attract dentists from overseas to implement the policy, he said.
