Net migration drops to lowest level since 2023
New data revealed a sharp drop in New Zealand’s annual net migration, with inflows reaching their lowest since January 2023, ASB reported.
August saw a net permanent and long-term (PLT) inflow of just 1,850 people, the lowest since June 2022. This drop was driven by a decline in arrivals and a rise in departures, with PLT departures hitting a record 134,247 over the past year.
According to Nick Tuffley (pictured above), ASB chief economist, the sharp decline in net migration is expected to continue.
“There is a real risk inflows fall faster than earlier envisaged and that we see net PLT outflows in 2025,” Tuffley said.
Economic growth slows as migration and tourism decline
The slowdown in net migration and the plateauing of tourism arrivals are projected to weigh heavily on New Zealand’s economic growth.
Tourism, a key economic driver, remains stuck well below pre-COVID peaks, with visitor numbers stagnating around 3.2 million annually – far from the 4 million seen before the pandemic.
“Falling net migration and a plateauing in tourism arrivals is consistent with our view that the OCR needs to return towards neutral relatively quickly,” Tuffley said.
Migration outflows expected to continue
The August 2024 data showed an increasing number of New Zealanders leaving the country, with a record 81,200 Kiwis departing for opportunities overseas. This resulted in a record net outflow of 56,100 NZ citizens.
Meanwhile, the arrival of non-NZ citizens also slowed, with PLT arrivals down to 163,000 annually, and work visa arrivals decreasing to 57,000 – the lowest since March 2023. This slowdown is reflective of reduced economic opportunities in New Zealand, and the trend is expected to continue into 2025, ASB reported.
Impact on policy: OCR cuts anticipated
As net migration and tourism remain sluggish, the Reserve Bank (RBNZ) is under pressure to ease monetary policy. ASB continues to expect a 50-basis-point cut in November to bring the OCR closer to neutral.
“We continue to expect another 50bp cut in November,” Tuffley said, emphasising the need to reduce the monetary policy constraint in response to declining economic support from migration and tourism.
Tourism remains flat, no signs of recovery
New Zealand’s annual tourism inflows remain well below pre-COVID levels, with August seeing a 4.3% drop in visitor numbers. Despite a steady flow of visitors from Australia, other markets like the US and UK showed declines.
Even with an increase in the international visitor levy set for October, Tuffley doesn't expect a significant change in numbers.
“Annual tourism arrivals remain well below pre-COVID peaks and show few signs of pushing higher,” he said.
Read the ASB Economic Note here.
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