Net migration climbs to near six-year high

Monday 22nd June 2009

New Zealand net migration increased to its strongest rate in nearly six years in May, stoking optimism the influx will start to underpin demand in the domestic economy.

Seasonally adjusted, a net 2,690 migrants arrived in May, the most since July 2003 when 2,800 permanent and long-term visitors arrived, according to Statistics New Zealand.

Short-term visitors increased 1% to 141,900 from a year ago as an extra 9,200 Australian visitors offset the 8,600 fewer tourists from Korea, China, and Japan.

“The longer net migration persists around these levels, the more optimistic we become on prospects for the domestic economy,” said Bernard Doyle, New Zealand strategist at Goldman Sachs JBWere. “Net migration was one of the key drivers behind the 2003-2007 economic upswing, and was particularly important for the construction sector.”

Strong immigration may have helped lift demand for housing at a time when the weak economy has sapped issuance of building consents. Central bank Governor Alan Bollard this month warned the economy faces risks if signs of stabilisation in the housing market are taken as a sign of another boom, spurring another cycle of “borrow and spend up large.”

“The gain in migration represents a tangible positive ingredient for underlying housing demand, reinforcing the improvement in affordability resulting from lower mortgage rates and falling house prices,” said Robin Clements, economist at USB New Zealand.

“With clear evidence of housing activity turning up, the drag that housing has placed on gross domestic product growth is set to fade in the second half.”

In May, the total number of properties sold rose to 6,291, from 4,372 in the same month of 2008, according to the Real Estate Institute of New Zealand (REINZ).

Fletcher Building, the largest listed construction company, gained 2.6% to $6.70 today, and has advanced some 14% this year as investors bet on an upswing in the property market.

Prime Minister John Key said the more than one million Australians who visited New Zealand in May was a record, and showed New Zealand tourism is open to its closest neighbour, despite the global economic slump.

“Tourism New Zealand has seen increased awareness of New Zealand in Australia in recent months and highly competitive airfares, good seat capacity, and a favourable exchange rate are all working in our favour,” he said in a statement.

Australia is being targeted by a $5 million marketing campaign between the government and Air New Zealand, which Key has estimated may generate $65 million of economic benefits. Shares in the national carrier gained 1.1% to 91 cents today, and have declined 6.3% in the year-to-date as rising fuel costs and fears of a worldwide influenza pandemic weigh on international tourism.

Auckland International Airport was unchanged at $1.57, while campervan operator Tourism Holdings, which will be removed from the NZX 50 index next month, slipped 2% to 48 cents today, and has slumped 27% this year.

China, another market targeted by the Prime Minister, has been less resilient, with visitors falling in nine of the past 12 months.

Businesswire.co.nz

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