Plane takes off from Queenstown Airport, New Zealand.
Meadows | iStock | Getty Images
Although New Zealand is recognized worldwide as a picturesque and progressive safe haven, its weak economy has prompted many of its citizens to leave the country.
With prices soaring, interest rates soaring and unemployment soaring, the government recently estimated that 131,200 people fled the country in the 12 months through June, a record number. Of those, about 80,200 were citizens, up about 70% from the year ending in June 2019, before the pandemic.
Wilson Ong, 32, a manager and buyer in New Zealand's fashion retail industry, has seen many of his friends leave, and he plans to join them.
“For me, the main factor is the quality of the jobs. In New Zealand, you feel limited in terms of job opportunities and what work experience you can gain,” he said.
It has long been common for young New Zealanders, also known as Kiwis, to seek out overseas experiences, with strict COVID-19 lockdowns delaying many travel plans.
“We are seeing a growing demand for this kind of overseas living experience,” Nick Tuffley, chief economist at New Zealand’s ASB Bank, told CNBC’s “Street Signs Asia” on Friday.
However, Toffley said the troubled economic recovery from the pandemic was also a “trigger” pushing New Zealand’s millennials and Gen Z population to leave. “It’s been tough.”
More than 50% of migrants to New Zealand in the year to June 2024 were people aged 20 to 39, according to government statistics, with those aged 25 to 29 making up the largest group.
“Over the past year and a half, the New Zealand economy has slowed and job losses have started, particularly among the younger generations,” said Shmobel Jacob, chief economist at the New Zealand Institute of Economic Research.
“Until the labour market improves, I don't expect these economic refugees to stop leaving New Zealand,” he said.
Cost of living crisis
Early in the pandemic, the New Zealand government implemented strict lockdowns and a mandatory 14-day isolation facility for arrivals into the country, in an attempt to stamp out Covid.
Before managed isolation was imposed, then Prime Minister Jacinda Ardern said nearly 40,000 Kiwis had returned home between 20 March 2020 and 9 April 2020 – more than all the hotel rooms available across the country.
New Zealand later won praise for its rapid response to the pandemic, which suppressed the virus for long periods, leading to low death rates.
Ong had shelved plans to move to England in 2020 and decided to stay in New Zealand, which he saw as a safer place to wait out the pandemic. He took advantage of Covid-19 wage subsidies and was later able to return to his former job in the country’s largest city, Auckland.
But those subsidies have since dried up, and many small businesses that closed during the pandemic lockdowns have never reopened. Meanwhile, persistently high inflation has squeezed the purchasing power of about 5 million consumers in the country.
In the second quarter of 2022, New Zealand’s annual inflation rate reached 7.3%, its highest level in more than three decades. While it has since slowed to 3.3% as of the second quarter of 2024, it remains above the Reserve Bank of New Zealand’s medium-term target range of 1% to 3%.
The nation's housing affordability — rents and mortgages compared to salary — has remained high, with housing affordability remaining worse than long-term averages, according to data from CoreLogic.
Meanwhile, as the country's economy stumbles in and out of recession, Ong said wages in his industry have stagnated, leaving him feeling worse off economically than he was before the pandemic.
“I think one of the features of a bad economy is the lack of opportunity to raise wages relative to the cost of living,” said Ong, who is currently looking for work in a number of countries.
CoreLogic NZ's chief property economist, Kelvin Davidson, said in August that the share of income needed to pay mortgage repayments had ranged between 53% and 57% over the past three years.
To put this in perspective, “mortgage payments only reached 50% or more of income for six quarters” in 2007 and 2008, during the global financial crisis.
low wages
Data shows that neighbouring Australia is the most popular destination for New Zealand migrants.
Not only is the economy improving in the neighbourhood, but the Australian government is making it easier for New Zealanders to move on a special visa. Since July 2023, New Zealanders who have lived in Australia for at least four years can apply for citizenship directly.
The Australian government has also sought to attract New Zealand public sector workers. In recent months, Australia paid for full-page advertisements in the New Zealand Herald, promising New Zealand police officers “warmer days and higher wages,” according to local media.
The latest New Zealand and Australia Salary Guide from recruitment firm Hays shows that jobs in a wide range of industries pay significantly higher wages in Australia.
For example, based on Hayes' data, a construction supervisor, a craftsman in charge of a work crew, can earn 60% more in Sydney than in Auckland.
In fact, the construction slowdown in New Zealand has opened the door to a loss of construction workers and engineers in places like Australia, according to ASB's Tofley.
“We also risk losing the skills of people who have completed their university studies in New Zealand, and who are looking to go somewhere else in the world,” Toffley added.
He added that while net migration to New Zealand had long been making up for labour shortages left by immigrants and slow birth rates, rising unemployment suggested New Zealand may now be dealing with a skills mismatch.
worse before it gets better
Despite growing concerns about brain drain and the loss of skilled workers, New Zealand can do little in the short term to improve its economic conditions, according to Ecop.
“I think (the economy) is going to get worse before it gets better,” he said, blaming part of the blame on a number of New Zealand's post-Covid policy moves, such as high interest rates, that have constrained consumer and business spending.
Although the Reserve Bank of New Zealand cut interest rates by 25 basis points last month, Icob says the economy is unlikely to start responding before 2025.
The country's political pendulum swung to the right last October, when the most conservative government in decades was elected.
The centre-right National Party has mirrored the progressive policies implemented by Ardern's Labour government that have earned the country significant social standing among liberals around the world.
The national government has also imposed widespread cuts to public sector staff to save money, as well as cuts to capital spending and investment in the private sector.
“We are in a state of austerity, and as a result the economy has been severely damaged,” Aqoub said.
—CNBC's Christina Chow contributed to this report.
