Weakened labour markets in Australia and New Zealand have resulted in a significant slump in net migration of NZ citizens, writes Dr Abul Rizvi.
TRADITIONALLY, net migration of New Zealand citizens to Australia has been substantially positive.
But if the differential between Australia’s and New Zealand’s unemployment rate remains at around current levels, net migration of New Zealand citizens to Australia may remain negligible or even turn negative.
For most of the decade to 2013-14, net migration of New Zealand citizens to Australia had averaged between 15,000 to 30,000 per annum, peaking at 44,690 in 2011-12 (see Chart 1).
In that year, New Zealand citizens represented over 19% of net migration and well over 12% of population growth.
Over the two following years, however, net migration from New Zealand fell sharply. In 2014-15, New Zealand citizens contributed only 4,670 to net migration of 184,030. That fall was a primary reason for net migration falling by almost 50,000 from 2012-13 to 2014-15.
Net migration of New Zealand citizens has remained well below 10,000 per annum ever since.
But why would that be the case?
The key driver is the relative state of the labour market.
Prior to 2013-14, unemployment in New Zealand was consistently around one percentage point higher than Australia’s (see Chart 2).
Fundamentally, strong labour markets attract people. Weak labour markets do not.
Since 2013-14, New Zealand’s unemployment rate has been around one percentage point lower than Australia’s.
And while Australia’s unemployment rate is likely to fall over the next few months as the effects of lockdowns subside and international borders re-open, it is unlikely to fall to the level currently in New Zealand of around 3.4%.
It should be noted that New Zealand’s low unemployment rate is not a factor of a low participation rate.
In fact, New Zealand has a significantly higher participation rate than Australia (see Chart 3).
In 2019-20, New Zealand citizen arrivals were 22,400 while departures were 21,200 for a net inflow of 1,200 — the lowest in decades.
While that was partly due to the pandemic, if the significant labour market differential between the two countries persists, we may see more New Zealand citizens departing than arriving.
A weak labour market would also mean we may return to a net outflow of Australian citizens.
While the net movement of Australian citizens in 2019-20 was almost positive 40,000, for the previous 15 years, at least we had a net outflow of Australian citizens.
The net outflow of Australian citizens peaked at negative 25,880 in 2014-15 when Australia’s unemployment rate was over 6%.
This highlights the fact that Treasury’s forecast of long-term net overseas migration averaging 235,000 per annum would be very difficult to achieve without a consistently strong labour market.
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