Saturday, March 25, 2006

Editorial: NZ must stay attractive to migrants

It would be wrong to be too fretful about the flight of New Zealanders to Australia. People are always attracted to bigger and brighter lights, like those of Sydney and Melbourne, or to a better climate, like that of Queensland. Nonetheless, this week's three-part Herald series revealed some new and potentially disturbing developments in this long-running trend. The flight of New Zealanders is not only on the rise again but this time it looks like a long-term exodus. And this time it is occurring despite this country's long spell of economic buoyancy.

The latter point is particularly significant. Migrants typically say they are crossing the Tasman for good, but many return in relatively short order. It remains to be seen whether the present net outflow, which has doubled in the past two years, will be any different. But never before has this level of departure accompanied a period of prosperity and low unemployment.

Some of the upswing is due to the onward movement of immigrants who have failed to find jobs in their professions here. Australia is a land of opportunity for them, and for highly skilled New Zealanders. But now it has also become increasingly attractive to the lowly paid, those who feel they are struggling to get by in this country without working excessive hours.

Their flight, often taken reluctantly, reflects in turn the fact that real incomes in Australia are, on average, 32 per cent higher than here. Higher wages and superior allowances are a pull factor that have become irresistible to many. If that situation is to change, it is obvious that the difference in real income between the two countries must be reduced.

There is no overnight solution. The gap is symptomatic of long-term structural problems, mostly related to New Zealand's persistently lower levels of labour productivity. This country has not been as smart or as efficient as Australia at using labour and capital, and has been further hindered by a lower rate of capital accumulation. New Zealanders invest too much money in non-productive areas, notably housing, and not enough in capital markets.

Both the major political parties recognise the need for higher productivity per worker. The Government has even made it a centrepiece of its third term. So far, however, its response has been timid: the faint-hearted Kiwisaver scheme to provide a stronger investment base and less costly capital by encouraging a savings habit, a bit of tinkering with rates of depreciation, and much work by reference groups. What the Government must do is provide a robust framework for solid investment, innovative thinking, skilled labour and astute decision-making.

Part of this involves the improved teaching of skills. It also involves appreciating the importance of investment in research and development. And of recognising that, in the final analysis, the answer lies in the hands of the private sector. The Government should be intent on removing any obstacles to that sector's pursuit of higher productivity. In that context, the establishment of the equivalent of Australia's Productivity Commission, whose task is to identify barriers to productivity growth in every industry sector, could pay rich dividends.

This focus is not just about slowing the exodus across the Tasman. It is about a long-term growth in living standards for all New Zealanders. We will never stop people shifting to Australia, just as we will not prevent the drift to Auckland from Waiouru, Waitara and Wairoa. But we must remain attractive to those who wish to bring their talents to this country. Given the international competition for skills, that is what we should fret about.

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