A record-high 201 New Zealanders emigrated each day on average in the year to the end of July, with 58% going to Australia.

Australia’s labour market is now accelerating ahead of New Zealand’s stalled market, further widening the 30% wage premium over the Tasman and providing job openings there while there are none here. Both long and short term policy decisions by the New Zealand and Australian Governments and Reserve Banks have driven the widening gap over both the last 30 years, and the last two years in particular.

Australia introduced compulsory savings, kept strong unions and kept a capital gains tax on residential property. The Reserve Bank of Australia stayed focused on both jobs and inflation. New Zealand did none of that. Australia also emerged from Covid with lower interest rates and more expansive government spending. New Zealand did the opposite, hiking interest rates at the same time as a fiscal policy tightening.

Paying subscribers normally get more detail and analysis in the video and podcast above.But I have decided to open this one up immediately, given the public interest involved and thank paying subscribers in advance.

What’s driving record-high emigration to Australia

A record high 73,400 New Zealand citizens migrated permanently in the year to July, with 58% going to Australia. That averages out at 201 per day, enough to fill an A320. Each day.

Even after the emigration of New Zealanders, there was actually a net migration gain overall of 13,100, thanks to the arrival of 140,500 new mostly-young workers, predominantly from India, China, the Philippines, Sri Lanka, Fiji and South Africa.

Thirty years of Australia’s faster productivity and real wage growth than New Zealand underpin the latest exodus of a net 94,500 citizens in the last two years. There was combined net emigration of 319,200 between 2002 and 2013, averaging at 26,600 a year over that period, before a relative slowdown to 5,700 a year between 2013 and 2019.

Australia reformed its economy more carefully in the late 1980s and early 1990s, choosing to bring in compulsory pension savings and keep strong unions, while New Zealand gutted worker protections and left tax incentives in place favouring residential property investment over investment in real businesses.

Over the last two years, Australia’s macroeconomic policies have favoured faster GDP and employment growth, thanks to a more moderate interest rate policy in tune with expansionary fiscal policy at a federal and state level.

New Zealand did the opposite, running very tight monetary policy in tandem with a tightening of Government spending growth. Those short term factors revived a further widening of the wage gap of around 30% and means Australia’s unemployment rate is about one percentage point lower than New Zealand’s.

I have included the charts below in my presentation in the video above. They are from this excellent note by Westpac NZ economist Satish Ranchod.

Timeline-cleansing nature pic of the day: Spring sprung

Ka kite ano.

Bernard

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