Scarce labour, a fallout of the long border closure due to Covid-19, coupled with a tightening of immigration rules will drag the economy, despite the large budgetary allocations for health, climate and infrastructure, economists say.
Add to that the high rate of inflation, disruptions to global supply chains and the rise in cost of living, the economic outlook for New Zealand would appear to be gloomy.
Satish Ranchhod, senior economist, Westpac, told the Indian Weekender that the focus of spending needed to shift away from Covid and to other priority areas such as health, education, and the environment.
Jarrod Kerr, chief economist, Kiwibank is inclined to agree. He welcomes the budgets focus on health, climate and infrastructure as these sectors are underinvested.
However, Ranchhod does not expect to see a dramatic rise in net migration levels following the tightening of immigration policy, which will result in a drop in low skilled workers from abroad.
Kerr, on the other hand, says the border reopening in July will boost migrant arrivals from non-waiver big markets such as India, China and South Africa. This in turn will offset the workforce shortage in NZ.
“As a country, we need to attract the right people and focus on the right areas and skills,” Kerr says.
Miles Workman, senior economist, ANZ, warns that New Zealand is at risk of losing Kiwi workers to Australia, and notes that “if that risk materialises, migration policy changes will only provide a partial offset to growing labour scarcities.”
As the current backlog of people waiting to enter and leave the country clears, it is expected that net migration will settle at around 30,000 people per annum. That's a big step down from the annual inflows of 50,000 to 60,000 people per annum in the years leading up to the pandemic, Workman says.
But the challenge ahead is to stem the outflow of skilled labour from New Zealand towards Australia, Ranchhod notes.
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