The Productivity Commission into immigration – was it worth it?22 Jul 2022

The Productivity Commission recently released its (120 page) report into New Zealand’s immigration settings. From the outset it was difficult to understand why the report was actually required, and why the task was given to the Productivity Commission, and exactly what its findings would contribute, in regard to the “productivity” of migrants.

The report was commissioned at a time last year when the Government had failed to deliver its promised “immigration reset”, and it very much looked like the report was a convenient option to help inform, and therefore defer, the reset policy announcement. The brief to the Commission focussed, among other matters, on the New Zealand immigration policy settings, the impact of immigration on infrastructure, and the impact on labour demand and wages. The report concluded that, on average, migrants make a positive contribution to New Zealand, improving wages, employment and productivity, something I think most employers would agree with.

Among the recommendations is for the Government to regularly develop and publish a Policy Statement which provides longer term guidance on the objectives of immigration settings, and how these will be managed and prioritised. Current immigration settings are almost totally reactive to markets, demands, and the ideology of the Government of the day, and there is no long-term strategy, such as a population policy, for immigration. What we do know is that New Zealand has an aging population, our birth-rate is well below the natural population replacement rate, we have a reducing tax-payer base, rising costs, and that the world is competing for the exact same migrants that New Zealand is wanting. Clearly, it is a no-brainer that we need a unified Government approach to planning for, and facilitating, the future migration that New Zealand needs just to pay its’ way. In our view, the Report should have been much, much more forward-thinking and directed in this key area.

Another focus of the report was about the “absorptive capacity” of New Zealand’s infrastructure to cope with migration and the “disconnect between immigration policy and the investment to expand capacity in the infrastructure needed to support population growth”. The report recommends that “absorptive capacity” should be a factor in immigration policy settings. However, given that infrastructure development is a long-term investment it can only be planned, and budgeted, for if there is a long-term population or similar plan, of which immigration is a critical and material component. Putting the blame on migrants for New Zealand’s lack of infrastructure investment to keep up with population growth is a bit rich and the report agrees - “these issues are not caused by immigration and will need to be addressed regardless of New Zealand’s immigration settings”. The fact that New Zealand has had no immigration for the past 2+ years, and housing and infrastructure challenges are worse than ever, confirms the report’s findings. It is also fair to say that the 1 million New Zealanders living overseas has “assisted” successive Governments to defer major infrastructure investment and, ironically, this could now be seen as a disincentive for such “internationally- acclimatised” New Zealanders to now return home.

The assumption that the demand for migrants to come to New Zealand is insatiable, and we have the luxury to “pick & choose” migrants from the cream of the
crop, is a dangerous one and it would have been helpful if the report had additionally provided commentary on strategies to attract the right migrants.

The report made some 24 recommendations, most of which have little, or no, relevance to the productivity or otherwise of migrants. However, the report probably served its purpose and provided Government the further time it needed to finally formulate and decide on its major immigration policy reset – albeit when the announcement finally came in May, we did not even get the reset but rather a lesser “rebalancing” of much of the same. Yes, we are all entitled to ask – was it worth it?

Link: First published in Waikato Business News June/July Volume 30: Issue 6 2022 Page 33