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Inflation and migration: Theory, evidence, and implications for the Monetary Policy Committee

Migration flows into and out of Aotearoa-New Zealand are at near-record levels and the Reserve Bank of New Zealand is working to understand the inflationary effects of these flows.

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.” 

Inflation and net migration
International migration estimates (provisional), year ended January 2024
The diagram shows outcomes-based (provisional) estimates of migration, by citizenship (New Zealand or non-New Zealand) for the year ended January 2024. Overall, net migration is 133,800, made up of a net loss of 46,900 NZ citizens (based on 27,300 migrant arrivals, a 0 percent increase on the year ended January 2023, and 74,200 migrant departures, a 39 percent increase) and a net gain of 180,700 non-NZ citizens (based on 229,800 migrant arrivals, a 115 percent increase on the year ended January 2023, and 49,100 migrant departures, a 17 percent increase). Estimates are provisional as of 14 March 2024.

“To summarise the available data and review existing research, we commissioned the NZIER to write a report on migration and inflation and the implications for monetary policy,” Mr Conway says. 

The paper also provides important background to RBNZ research on the macroeconomic and inflationary impacts of migration. 

“Migration influences both overall demand and the supply capacity of the economy,” Mr Conway says. “For each wave of migration, we need to understand the balance of these effects, which determines the overall impact on inflation pressures.”

In general, the effect of migration on the demand for goods and services occurs almost immediately as net migration rises, whereas supply effects can work with a lag. However, the current migration wave has quickly eased labour shortages, making it much easier for businesses to find workers. Strong net immigration is also adding to demand, with rising rent inflation, for example. 

See the chart showing annual migration by citizenship |

“Much of our immigration is temporary – overseas workers may come for a short time and send most of their income home, rather than spending it here. Kiwis may do their OE and then come home.

There is very little literature on the economic impacts of this type of short-term migration,” Mr Conway says. 

“We are doing more research to improve our understanding and monitoring of the macroeconomic impacts of migration. Large migration flows are a key feature of the New Zealand economy, and we need to better understand their effects. 

More information

International migration: January 2024 |

Australia's population by country of birth | Australian Bureau of Statistics

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