Coalition landmine awaits in residency range call

Labour and New Zealand First are considering whether to abandon a 20-year-old practice of limiting total residency approvals at between 37,000 and 47,000 a year. Dileepa Fonseka reports this much-delayed and politically explosive decision is due before the election.

Economist Shamubeel Eaqub has written a lot about migration, but in all his writings has never been able to get a real answer to one question: “What do you want?”

“We have no strategy...we’re just kind of doing stuff,” Eaqub said of New Zealand's immigration and population policy.

“Essentially we’re addicted to population growth and it’s a very convenient way to increase the number of people, increase the number of voters, increase the number of workers, it just keeps things ticking over,” he said.

“The challenge with that is it doesn’t mean all of the stuff that goes with it necessarily keeps pace, particularly around things like infrastructure that’s long-lived and expensive.”

Immigration Minister Iain Lees-Galloway and the government are working on more “stuff” to keep that system ticking on.

The New Zealand Residence Programme (NZRP) Planning Range, which sets residency targets, is one of those. It expired at the end of last year and was not replaced.

Immigration industry players had expected an announcement around Christmas, and Galloway's office had said New Zealand First and Labour were in negotiations for a decision in December or January. The issue is potentially divisive within the coalition, given New Zealand First campaigned in the 2017 to cut net migration to 10,000, but was unable to get Labour to agree to that in their coalition-forming agreement.

Will the total residency planning range rise, fall or stay the same?

New Zealand First cabinet minister Shane Jones has indicated New Zealand First would campaign later this year to limit population growth through migration. An effective increase in the planning range would clash with New Zealand First's migration reduction rhetoric. Labour talked tough against temporary worker migration in the 2017 campaign, but has approved many more work visas in Government. It has issued an average of 28,584 temporary work and student visas per month since it was elected, which is 25 percent more than National's average of 22,942 per month from 2009 to late 2017.

Labour campaigned with a policy set by previous leader Andrew Little to reduce student and temporary visa numbers by between 20,000 to 30,000 per year, but has in reality increased approvals of visas with temporary work rights by around 68,000 a year.

Lots more temporary workers applying for fewer residencies

The only area the Labour-New Zealand First coalition has tightened migration settings is for residency visas, cutting approvals by around 15 percent to a monthly average of 3,103 from National's monthly average of 3,629.

New Zealand has operated a 'planning range' of 45,000 to 50,000 residency approvals per year since the early 2000s, and this has often been expressed as a two-year range from 90,000 to 100,000. The previous National Government lowered the range to 85,000 to 95,000 for the two years to June 2018, which meant the annual allowance fell from 47,500 to 45,000. The current Labour-New Zealand First Coalition Government lowered that again to between 50,000 to 60,000 for the period from 1 July 2018 to 31 December 2019, effectively lowering the annual rate of 37,000 for the period that expired at the end of last year.

So, the number of work visas has grown while the number of potential residency visas has been cut. In 2008 there were a potential 125,000 applicants on work visas for 47,000 residency visas: a ratio of 2.65 to one. Today that ratio sits at 7.84 to one. It has meant the number of unprocessed residency applications has almost quadrupled in the last two years, as this previous article reports and this chart shows:

A hot potato for cabinet

A new planning range requires a cabinet vote, but Lees-Galloway said the government does not want to replace the NZRP planning range with another planning range of the same ilk. He wants separate planning ranges for skilled migrants, humanitarian and family categories instead. A cabinet paper from Immigration New Zealand even proposed options to leave certain categories uncapped.

Lees-Galloway said it would make the skilled migrant category less prone to bearing the brunt of any initiative to cut numbers. 

“Often the first stream to get squeezed is business and skilled stream, which is exactly the people that we really wanted to encourage to come to New Zealand," the Minister said.

Lees-Galloway said “I’m not going to rush it,” but “I’ll be looking for a decision from cabinet before we go to the election."

“I want to make sure that we take the time to do the policy work rather than rush towards an arbitrary date knowing that in the meantime things just carry on, if there was some pressing negative impact on people then I’d want to push it,” he said.

Lees-Galloway said residency applications would be processed “at the same rate” and would not stop because a decision on planning ranges hadn’t been made. 

He wanted a decision before the election. New Zealand First Immigration spokesman Clayton Mitchell was not available for comment on Thursday.

“Ticking along”

Massey University's Pro Vice-Chancellor Paul Spoonley wouldn’t use the word ‘addicted’ to describe New Zealand’s relationship with migration, but acknowledged it had proven hard for governments to cut migration levels in the past. 

“This country is built upon immigration in a way that is quite unusual globally,” Spoonley.

When New Zealand last had a “significant downturn” in migrant numbers, between 1996 and 1998, it wasn’t long before the country quickly changed tack.

“It completely took the heat out of the housing market, that might be a good thing and a bad thing, but you’re going to have a number of flow-on effects,” Spoonley said.

“That’s the tension isn’t it? Between growing an economy by providing the skills required in the labour market versus the demand it has on things like infrastructure and houses.”

That period was when the first MMP National-NZ First government was elected and the Asian Financial Crisis hit. 

Spoonley said there was quickly a “realisation” that the decline in immigration had hit homeowners in the back pocket. 

Labour was elected after that government collapsed. He said the Clark-led Government made 33 changes to the immigration system to open immigration back up.

“The tap started to be turned on again,” Spoonley said.

Growth or productivity

Union Network of Migrants spokesman Mandeep Bela questioned why a number or target for residency was needed at all. 

Bela said if migrants were employed then they were needed in the country because they had filled a shortage.

“There’s no point putting a number on it,” Bela said.

Business NZ Skills and Immigration Manager Rachel Simpson said New Zealand had had significant skills shortages over a long period of time. 

She wanted flexibility from any replacement to the NZRP, including an ability to ramp up immigration in certain areas of shortage.

“Migrant workers are the ones who are filling those gaps,” she said.

“Without our migrants we wouldn’t be enjoying the growth that we’ve got at the moment.”

Lees-Galloway and the government agreed there were skills shortages in particular areas, but Eaqub and economist Michael Reddell disputed that. 

'Let wages rise instead'

Immigration had been the "safety valve" for the economy and allowed businesses access to a relatively large labour pool that had led to low capital investment, Eaqub said.

"If there was such shortage then we would be paying a hell of a lot more for workers," he said.

Economist Michael Reddell has advocated for New Zealand to grant residency to a much smaller number of people: 10-15,000 people per year. 

"My analysis of the numbers is consistent with a story that says look there are some talented and able people, but there are a lot of people who aren't really adding anything much, the people who are coming in as cafe managers and shop managers," Reddell said.

"If what we're trying to do is lift economic activity, what you want is that small-ish group of really, really able and talented people," he said.

Building to keep up with population growth had squeezed out export industries. If population growth slowed, interest rates would be lower and that would encourage a lower exchange rate, he said.

Productivity growth would also improve, the former Reserve Bank economist said. Unable to reach for cheap labour, businesses in industries like horticulture might substitute in capital investment instead, he said.

"Mostly our economy has been built on building houses to house people who are already here," Reddell said.

"There are all these constituencies that have a vested interest in it [immigration] continuing. If you're in Auckland most of your economy is based on the fact that the population is growing."

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