Corey Ngaru and his partner, Elian Lellimo, left recession-hit New Zealand for the sunshine of Australia’s Gold Coast just a week ago, bidding a teary farewell to family and friends as they seek better jobs and pay elsewhere.
“There’s a bunch more options, more opportunities,” said Ngaru, who estimates he would be able to earn three times more working as a builder on the Gold Coast as he would in New Zealand.
Ngaru and Lellimo, who is originally from Argentina, follow 128,700 people who permanently left the Pacific nation of 5.3 million last year, provisionally the largest exodus on record.
The rush to leave comes amid the worst economic downturn since 1991 outside of the COVID-19 pandemic, which analysts blame on low productivity and various policy missteps in part caused by unreliable data.
Unemployment is at a more than four-year high, while the number in work saw the largest annual decline since 2009. Companies are going bust at the fastest pace in more than a decade.
HSBC said New Zealand’s economy was the worst-performing in the developed world last year.
Across the Tasman Sea, Australia’s economy has fared much better by comparison, with unemployment near record lows, making it once again a hot choice for kiwi jobseekers.
Since 1973, Australians and New Zealanders have been able to live and work in either country without restriction.
While the number of migrants has ebbed and flowed over the years, the greater job prospects in Australia — particularly in mining and construction — mean the net traffic is mostly westbound.
More than half a million New Zealand-born people now call Australia home.
To be sure, New Zealand still has more people arriving than leaving. However, net immigration has fallen significantly, with 27,100 net immigrants last year from 128,300 in 2023.
POLICY FLAWS
Although New Zealand was quick to respond to COVID-19 with early border closures and economic stimulus, both actions fanned inflationary pressures and pushed house prices to historic highs.
As a result, the central bank hiked interest rates at the fastest pace in its history, while the government rapidly turned off the fiscal spigots, throwing the economy into recession.
“We had this kind of double effect of very strong stimulus that was reversed very, very quickly,” said Shamubeel Eaqub, chief economist at pension fund provider Simplicity.
Eaqub compared that with Australia, where rates never went as high. The Reserve Bank of Australia did not feel the need to start cutting until last month.
The Reserve Bank of New Zealand (RBNZ), in contrast, confirmed back in November 2022 that it was deliberately trying to engineer a recession. By May last year, it had accomplished that goal, even as it maintained an expectation it would have to hike further.
While the bank promptly changed tack with a rate cut in August last year, its previously hawkish warnings had already whacked businesses and households.
Clouding the central bank’s deliberations were the timeliness and accuracy of official data. In December last year, Statistics New Zealand undertook significant revisions showing the economy had enjoyed faster growth in 2023 than first thought, and that it also shrank much more violently in mid-last year than previously estimated.
“If we had perfect knowledge, perfect, accurate real-time data, then it would affect how we communicate,” RBNZ chief economist Paul Conway said. “Unfortunately, it’s not physics.”
The conservative government’s budget last year targeted lower debt and included little new spending to support the economy.
Despite spending cuts, lower tax revenue forced the government to give up on achieving budget surpluses in the next five years.
COST OF LIVING
Charities said the slowing economy has worsened poverty.
A report by the Salvation Army released earlier this month found that 400,000 people needed welfare support, the most since the 1990s. Food insecurity and homelessness have also risen.
“I think there’s only a handful of occasions when life has been tougher for people than it is today,” said Murray Edridge, city missioner for Anglican charity Wellington City Mission. “There’s talk that there’s signs of economic recovery, and that may be correct, but it’s not for everyone, and the trickle-down effect of that for the people who are struggling ... is a very distant thing.”
The Treasury and the central bank expect data due March 20 to show the economy grew slightly in the fourth quarter.
Conway said while some businesses should start to see improvement, households were unlikely to feel much relief until the second half of the year.
Compounding matters, New Zealand’s economic productivity is below that of most peers and saddled with high residential property debt.
The government, which polls show would struggle to win an election if called today, is pushing policies it said would improve growth, such as reducing regulation, supporting mining and investing in tourism.
New Zealand Minister of Finance Nicola Willis last month said the challenges need to be met urgently.
Lellimo and Ngaru plan to return to New Zealand one day, when they are more financially secure. However, for now, New Zealanders are voting with their feet.
“We love the country, but the economic side of things wasn’t that great for us,” Lellimo said.
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