New Zealand needs immigrants to fill skills shortages, Prime Minister Chris Hipkins said, indicating he won’t seek to actively curtail a record inflow of foreign workers if he wins next month’s election.
“We are going to have to bring in skilled workers,” Hipkins said at the Bloomberg Address Wednesday in Auckland. “What we will focus on is making sure the immigration that we have is contributing to economic growth and isn’t being used as a substitute for it.”
Hipkins, leader of the ruling Labour Party, said governments “can grow the economy just by putting people into it but that’s not going to raise our standard of living.”
“We have to carefully consider our immigration settings all the way along to make sure it’s contributing to overall growth per capita,” he said.
New Zealand is experiencing near-record net immigration after Hipkins tweaked policy to help solve a damaging worker shortage that was driving up wages and costs. The surge of arrivals has so far helped to calm pressures in the labor market without injecting fresh demand into housing that might trigger a fresh wave of inflation.
Net immigration rose to almost 87,000 in the 12 months through June — nearing the March 2020 peak — led by a record net 122,000 foreigners entering the country.
Hipkins said immigration has probably peaked and will decline, but he refused to set a target as his party did six years ago when it came into office.
The population surge means Hipkins is walking a tightrope ahead of the Oct. 14 election. His center-left Labour Party has traditionally opposed high immigration, campaigning for limits which would protect wages and being critical of how foreign buyers drove up house prices.
“Labour was very clear it wanted to build a high-wage, high-skill economy and do that through education and not by relying on heavy immigration,” said Robert MacCulloch, professor of macroeconomics at Auckland University. But “he was losing business support, and was also facing a weak economy. To me there seems a very clear link that the view was to radically loosen immigration to please business and to get the economy back up and running.”
While companies are now saying that skill shortages are not their most pressing concern, the economy is not back up and running. Most forecasters including the Reserve Bank expect it to enter a double-dip recession in the second half of the year.
Using immigration as a tool to tackle skill shortages is acceptable policy if it isn’t overdone, said Craig Renney, chief economist at the Council of Trade Unions. For now, the labor market has been strong enough to absorb the extra workers without driving down wages, he said.
“It is an easier lever to pull, but the ease with which we can pull it shouldn’t cause us to overuse it,” he told Bloomberg. “We shouldn’t be using immigration as a means to then simply say we don’t need to do training, we don’t need to do the development of the workforce.”
Renney wants the government to pay more attention to overall workforce planning and the role of immigration. That includes considering whether New Zealand has the skills required to take on a particular project and, if foreign workers are required, the capacity to absorb them into the community.
At Labour’s campaign launch last weekend, Hipkins said his government would extend free dental care to all those aged under 30 years. But the country would have to attract dentists from overseas to deliver on that policy, he said.