Inflation and migration: Theory, evidence, and implications for the Monetary Policy Committee – Reserve Bank of New Zealand – Te Pūtea Matua

A new research paper by the New Zealand Institute of Economic Research (NZIER), commissioned by the RBNZ, outlines how migration can add to or reduce inflationary pressures depending on the size and direction of flows and the characteristics of migrants. The ability of the host economy to ‘absorb’ migrants – which is influenced by the state of the labour market, housing, infrastructure, and health and education services, etc – is also a significant factor.

Read the research paper on the NZIER website

“Overall, there are no clear rules of thumb on the effects of migration on the economy as a whole and inflation,” RBNZ Chief Economist Paul Conway says.

“We have seen many waves of migration into and out of New Zealand in the past century. Each wave is different and with differing effects on inflation pressures,” he says.

In the year ended January 2024, there was an annual net migration gain of 133,800. This made up most of the 2.8 percent increase in New Zealand’s population in 2023. New Zealand has exceptionally high migration per capita, both in and out, compared with other OECD countries.

“The near-record migration gain last year was driven by a very large number of mainly working-age non-New Zealand citizens coming into the country,” Mr Conway says. “This was partly offset by tens of thousands of New Zealand citizens leaving the country long-term, with about half going to Australia. About 586,000 New Zealand-born Kiwis now live in Australia.”

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