Tuesday June 19, 2007

The Government is taking a cautious approach to immigration, pushing down the numbers of incoming migrants while seeking further advice on the impact of immigration on inflation. It is understood a paper is being prepared for the Cabinet which will address, among other things, the effect of immigration on the housing market.

As the Reserve Bank and New Zealand First highlight the effect of immigration on inflation and the housing market, the Government has decided to drop the target of incoming migrants this year to 47,000, the bottom end of the 47,000 to 52,000 forecast.

Despite this, Immigration Minister David Cunliffe is standing by his comments in May, when he said the impact of immigration on the housing market was "likely to be relatively small". He concedes that immigration does have an impact, but says the size of the impact is uncertain. He said the large influx of migrants in 2002 and 2003 and a strong surge in the housing market suggested a strong relationship between the two, but he stopped short of saying that one caused the other.

However, New Zealand First leader Winston Peters dismissed Mr Cunliffe's views. "He's wrong. Immigration has had a rippling effect right through New Zealand and it has had the most profound effect on the rising price in Auckland."

Mr Peters acknowledged that the influx of tens of thousands of immigrants was offset by a similar number of people leaving, but that did not alter the demand pressures from immigrants.

The Reserve Bank, in its submission to the parliamentary inquiry on housing affordability, pointed to curbs on immigration and a capital gains tax as ways to dent demand in the housing market.

(Source NZ Herald, Derek Chang)