Rise in immigration could mean hike in interest rates
Wednesday December 20, 2006
By Owen Hembry

Rising immigration is fuelling retail spending and the housing market, strengthening the chances of an interest rate hike, economists say. Statistics New Zealand said yesterday there was a seasonally adjusted net migration gain in November of 1860 people, up from 1160 in October.

Overall permanent long-term arrivals - which includes New Zealand residents returning after an absence of at least a year - exceeded departures by 2729 last month, compared to 1729 more arrivals than departures in November last year.

ANZ Bank economist Sean Comber said the latest migration numbers were working against the Reserve Bank's attempts to take some heat out of the consumer and construction sectors.

The Reserve Bank was likely to read the latest immigration results as more of an inflationary threat than not, Comber said. "It certainly, at the margin at least, adds to the risks of a rate hike," he said. "On the other hand ... net migration also adds to the labour supply and takes some of the pressure off the labour market, so there is a balancing act required."

Immigration continued to creep upwards with November's result slightly higher than expected, but within the realms of what was reasonable, Comber said.

However, migratory support for housing and retail spending alone would not be enough to trigger an interest rate rise, he added. "Where we're seeing things at the moment is that it's likely to take some sort of a catalyst to push the Reserve Bank over that hurdle to actually delivering a rate hike."

The main risk could come from inflation numbers due out in mid-January, he said.
Record visitors

Visitor arrivals of 229,913 in November was a record for that month with strong Australian growth and a reduced decline in Japanese numbers.

Statistics New Zealand said the number of short-term visitors in November was up 7.1 per cent on last year, with Australia (up 10.3 per cent at 70,070) and Britain (up 7.5 per cent at 29,348) leading the way.

Meanwhile, Japanese visitor numbers fell 1.1 per cent, having fallen 24.2 per cent and 21.6 per cent respectively in the previous two months.

Tourism New Zealand chief executive George Hickton said it was great to see the numbers creeping up. "The upcoming season is looking very positive and the industry should reap the benefits this summer."

* Long-term migration in November:
* Seasonally adjusted net inflow of 1860 people.
* Arrivals up 12.1 per cent at 7120.
* Departures down 5 per cent at 4391