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Permanent departures up, arrivals down

Permanent departures up, arrivals down

Net permanent migration flows have a substantial impact on New Zealand's small, open economy. Net permanent migration is trending lower as departures have increased and arrivals have flattened off. In the month of October, New Zealand gained just 260 long term immigrants, taking the annual sum down to 7,500. The annual sum of net migrants is now lower than the 8,300 reported in September, and well short of the cyclical peak of over 42,500 touched in mid-2003 (chart). As the charts below suggest, large swings in net permanent migration impact housing demand, consumption and even labour market dynamics (see research note attached). Should this downtrend continue, the downside to New Zealand's weakening housing market will be exacerbated.

Large swings in net migration often trigger economic instability in New Zealand. Rising net migration fuels demand for, and even speculative behaviour, in the housing sector, which stimulate non-tradables inflation and strengthens the need for tight monetary policy. Moreover, falling (or negative) net migration contributes to weakness in residential investment and domestic demand (charts). The current downturn is adding to the weakening demand in the housing market and will lower the floor under consumption growth.

Short term international travel in October was affected by the rugby world cup in France, with the number of NZ residents departing to France and the United Kingdom increasing 10%oya. There is no need to mention the result of the rugby world cup....... There were just 179,900 visitor arrivals in October, a decrease of 6,700 (4%oya) on the 186,600 visitor arrivals in October 2006. That said, given the strength of the NZD, the level of tourist flows into New Zealand has been surprisingly resilient. The number of visitor arrivals in October was the third highest total recorded for an October month.


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