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Immigration Update April 2021

Immigration Update April 2021

One year ago, on the edge of a public health landslide, the country went into lockdown. Essential workers and those who could work from home were still working, but large parts of the economy simply switched off. The risks of deflation, a downward spiral in demand, and mass unemployment loomed. While the unemployment rate did rise in 2020, the increase was certainly much less than the projections from a year ago. In April 2020, amidst the level 4 lockdown, Treasury scenarios forecast unemployment reaching double-digits, peaking at more than 25 percent in the worst case (which involved a much more extended period of lockdown than actually occurred). Even the most optimistic scenario (which included significant additional fiscal support) unemployment was projected to peak at 8.3 percent – well above the current 5 percent.

It seems clear now that the wage subsidy and other business supports put in place by the government have helped many businesses bridge the gap in revenues without having to resort to mass layoffs of staff. But we’re not out of the woods yet. Unemployment is typically a lagging indicator of changes in GDP, and significant recessions typically see large increases in unemployment. With all the ‘noise’ in the data from last year’s events, it remains to be seen whether we are on the verge of increasing unemployment over 2021, or if, thanks to a strong policy response and a healthy dose of good fortune, we have largely avoided this.

New Zealand’s economic history is one of reliance on the primary sector exporting minimally processed commodities to buyers in other countries. Think wool, dairy products, logs, red meat, seafood and so on. Exports of meat and dairy products were another thing helping the economy through 2020. However, the value of products exported tailed off and was weaker over the end of 2020 and early 2021 than a year earlier. Dairy volumes have been trending lower since last September, while falls in meat exports have been price driven. Nevertheless, dairy prices (measured by the GDT index) remain at their highest since the early part of 2014, prompting increased estimates for the dairy pay-out this year.

New Zealand is so short of labour that heading into the Covid-19 shock 8% of jobs in the country were held by people on migrant visas compared with 4% ahead of the GFC. Some sectors have become so dependent upon foreign labour that they can barely function without it. They include farming and horticulture, accommodation, hospitality, tourism services, and even some retail. In
the construction sector skilled staff are in short supply and this is already acting as a constraint on the volume of new houses etc. which can be built. The government is doing a good job trying to boost staff numbers through apprenticeship assistance and training schemes. But the staff are not going to appear rapidly enough for a number of reasons. Then there are shortages of labour in the primary sector which will be ongoing. Kiwis in cities have voted with their feet by not using their feet to shift to the regions to undertake either seasonal or permanent farm work. Need one also mention the shortage of staff who can pass drug tests which is a constraint in the forestry sector about to get worse as demand for our logs is growing out of China.

Expectations for the wider New Zealand economy remain negative overall, but significantly better than they were last September. These optimistic expectations are also reflected in businesses hiring intentions. Thirty percent of smaller businesses (with 1-10 full-time equivalent employees) expect to increase their workforce in the next 6 months, while only 6 percent expect to downsize their workforce. Fifty-two percent of businesses with more than 10 workers expect to hire more, and just 11 percent expect to reduce their workforce.

Two-thirds of businesses consider that a shortage of appropriate skills affects their ability to hire new employees. Nearly half (48 percent) consider this is due to a lack of skills amongst New Zealand residents, compared to just 4 percent who think it is a lack of skills amongst immigrants. Clearly this problem already existed and is not just one caused by pandemic-related border restrictions. Better identifying exactly what skills are lacking and working to develop them are important steps in making sure New Zealand has a labour force that can match the aspirations of its businesses.

Before you commit to higher output, make sure you will be able to command the resources you need to produce that output. You’ll have to engage in workforce planning in ways you have not done before.

While recent positive changes in the immigration context do not drastically affect our clients, these can all be viewed as positive steps in the right direction which should eventually develop into the reopening of borders to work visa holders as MIQ spots are freed up. Some of the changes you might have seen as below:





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