The new chair of the Productivity Commission, centre-left economist, Ganesh Nana


While the Productivity Commission’s report on immigration released today is really only a work in progress, it has already begun to counter some myths about immigration in New Zealand.

There will be much interest in the report if only to see whether the Commission has undergone a major ideological transformation under its new chair, Ganesh Nana.

He replaced Murray Sherwin, an economist with a long track record working on the free-market reforms, which began with Sir Roger Douglas in 1984.

Nana, on the other hand, has headed BERL economic consultancy who have been the economists of choice for the union movement.

The report will, however, be controversial if only for a proposal that a condition for permanent residence be that migrants learn Te Reo.

But this report bears little sign of any undue union influence.

From time to time, the Combined Trade Unions (CTU) have criticised immigration policy, arguing that if employers paid more to New Zealand workers, they would not need immigrants.

And in 2015, then National Government Finance Minister Bill English said wages could have gone up by more had immigration levels been lower.

“If there are fewer people that show up, it is possible that wages might have been a bit higher,” he said.


However, the Commission has found that, on average, immigration has not come at the cost of locals’  wages and employment.

“A common source of concern with immigration is that it may push down wages, hiring opportunities and conditions for local workers,” the report says.

“The Productivity  Commission considered both the domestic and international evidence on how immigration affects the labour market outcomes of local workers.

“Overall, New Zealand studies find very minor and mostly positive  impacts on the average earnings and employment of local workers.”

However, immigration into New Zealand has hit unprecedented highs over the past few years, so much so that the largest part of our population increase has come from immigration.

“It is commonly thought that the growth of the workforce is due to existing residents reaching working age,  “topped up” by immigrants,” the report says.

“However, the number of new permanent and long-term migrant arrivals (aged 15-64) has, in recent years, exceeded the number of New Zealand residents turning  15 and who could  potentially enter the labour  force.”

But the nature of immigration has changed.

It says that for much of New Zealand’s history, immigration policy has focused on permanent migration and settlement.

Over the past decade or so, however, the composition of immigration to New Zealand has shifted significantly towards temporary migration, e.g., student and work visas.

“This is largely the result of policy choices made by governments in response to demands from

 employers for workers, the growth of the international education sector, and a points system for residency that awards  points  for having an existing  job offer and or New Zealand work and study experience. “

Work undertaken by the New Zealand Infrastructure Commission Te Waihanga suggests that around one-quarter of future demand for infrastructure is likely to come from population growth from all sources.

Submissions to the Commission and wider public commentary raised questions about the effects that large-scale immigration might have had on the country’s infrastructure.

But the report says the situation is complex.

“New roads, bridges, hospitals often involve large and expensive investments that scale to serve many people,” the report says.

“However,  when averaged across  the country, over time and different types  of infrastructure, the relationship between population growth  and the demand for infrastructure investment is positive and stable.”

The  Commission argues that far from being a drag on the economy, immigrants are a positive fiscal gain.

“Studies find significant net positive fiscal impacts,” it says.

It quotes a 2007 study that found that “migrants contributed a total of $8 101m through income taxes,  GST and excise duties. Estimated fiscal expenditure on the migrant population was $4 813m.”

“Consistent with international studies, the annual net fiscal impact of migrants in New Zealand increased with the duration of stay and was higher than for the locally born population,” the report says.

But where the Commission found problems was not with the overall goal of encouraging relatively high migration but the way it was administered.

It said the immigration system was conspicuous for lacking a clear and single overarching strategy or set of priorities. 

“The main piece of legislation (the Immigration Act 2009) provides little guidance, stating simply that its purpose is to “manage immigration in a way that balances the national interest, as determined by the Crown, and the rights of individuals.

“The Government is not currently required to publish how it interprets “national interest” in relation to immigration.

“Most insights  about how ministers  consider questions of immigration objectives and outcomes have been revealed through interested members of the public requesting advice  under the Official Information.”

The report says there is no common set of goals against which performance can be assessed; the various visa categories operate independently, and the lack of a public engagement mechanism means that the main vehicle for expressing concerns about immigration is through the election process, which has historically meant that some political parties have campaigned on immigration policy.

“This can lead to policy responses that are blunt or narrowly focused, and which do not necessarily serve the long-term interests of the community as a whole,” the report says.

Immigration policy settings are not clearly linked to other relevant areas,  such as education and training or infrastructure investment.

“As a result, decisions on the numbers of new arrivals are not complemented by decisions on other areas that matter for the wellbeing of them and other residents,” it says.

The report confirms that there are lengthy processing times and long queues.

Migrants applying for the Skilled Migrant Category (SMC) must meet a minimum threshold for a number of points, currently 100.

They then enter the Expression of Interest (EoI) pool,  which is intended to manage the number of applications received to fit the planning range.

“The Government’s management of the EoI pool,  however, has not extended to ranking migrants once they reach  a certain  number of points,” the report says. 

“This can lead to large queues of migrants awaiting their application to be processed or awaiting residency in the EoI pool.

“As of August  2021, almost  13 000 skilled residence applications were in the EoI pool.

It goes on: “Large queues of applicants for residence visas have increased uncertainty and reduced the likelihood of achieving a pathway to residence. This has left many migrants in flux and unable to settle.”

The Commission says Governments should better utilise tools for prioritising migrants when there is high demand.

This should include being more selective and transparent with the points system and developing more data-informed and dynamic skills shortage lists.

Visa conditions that tie migrant workers to a specific employer should be removed.

“Allowing migrants to move reduces the risk of exploitation and permits them to find jobs that better match their skills and experience,” it says.

The Commission does offer a potentially controversial proposal to encourage migrants to better fit into New Zealand.

“The Commission considers that efforts by migrants to learn te reo could be formally recognised in decisions about a resident or permanent resident status. Learning te reo is an important means of gaining insights into the ao Māori and tangata whenua, and so can promote a better understanding of New Zealand’s bicultural nature,” it says. 

“An interest in learning te reo may also signal a willingness to commit to New Zealand and could therefore be relevant to whether an applicant will settle.

Currently,  applicants for permanent residency must demonstrate their commitment to New Zealand by meeting one of five criteria, such as spending enough time in the country,  being a tax resident, and establishing a base in New Zealand.

“Finally, such a policy would acknowledge the status of te reo as an official language and taonga.

“The policy could  be implemented in a number of ways, including awarding additional points  in the SMC for people who successfully  complete a te reo course, or by making it a condition for a permanent residence visa.”

The Commission is undertaking further research and will present its final report in April next year. That report is expected to form the basis of the Government’s immigration “reset”.