Data Flash (NZ) External Migration - April 2002

Data Flash (New Zealand) External Migration - April 2002

Commentary

In March, New Zealand recorded the strongest seasonally adjusted net inflow of permanent migrants in over 40 years. The latest data suggests that the net migrant eased a little in April, in line with our expectations. This largely reflects a decline in gross inflows from the March high. Gross outflows have remained broadly stable over recent months.

Provided that net migrant inflows continue to ease back over coming months, as we expect, today's data is broadly consistent with the RBNZ's assumption that the annual net inflow will peak at around 30,000 people over the course of 2002. The balance of risks is that this assumption is exceeded modestly if migrant inflows are slower to ease than we currently project.

The positive impact of the net migrant inflow - equivalent to 0.8% of New Zealand's population - on the demand for housing and consumer durables, with consequent flow-on impacts on inflation, is one of the key factors underpinning the Bank's decision to withdraw monetary stimulus more aggressively than other central banks.

Tourist arrivals fell back sharply in April, following a surge in March, with the monthly pattern influenced by the timing of Easter. While a substantial fall was expected in April, the decline exceeded our expectations, and suggests that the post 11-September rebound may not have been as strong as we thought previously. Nonetheless, in our view, the tourism sector will continue to be one of the key drivers of New Zealand's economic growth over the period ahead, notwithstanding the strengthening NZ dollar.

We continue to expect the RBNZ to raise the official cash rate by 25bps to 5.75% at the 3 July Monetary Policy Statement. The strengthening NZD - now already 2.5% above the RBNZ's May forecast for H2 2002 - is contributing to the withdrawal of monetary stimulus, and in our view, makes a 50bps move in July quite unlikely, especially with the next round of key economic data not due until mid-July/early August (Q1 GDP is due late June, and while we expect growth to exceed the RBNZ's expectations, we doubt that this alone could be used to justify a 50bps hike).

Key points

Adjusting for seasonal effects, a net 3,100 people migrated to New Zealand in April, taking the annual net inflow to 28,065. This compares with an annual net outflow of 11,400 in the preceding year. To put this in perspective, the turnaround in migrant flows over the past year is equivalent to just over 1.0% of the country's population.

The number of tourist arrivals fell 19.3% mom in April following a 13.6% mom rise in March. Compared to last April, the number of tourist arrivals was 6% lower. The timing of Easter explains the volatility over the past two months. However, the underlying trend in arrivals appears weaker than we thought previously.

The number of short-term departures by New Zealand residents fell 18.9% in April following a 13.3% rise in March and was 17% lower than a year earlier. The timing of Easter has also impacted on this series.

Darren Gibbs, Senior Economist

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