Record high net migration over the past year has been a lifeboat for New Zealand’s economic growth, dominating recent trends in employment, housing demand, and demography. Quarterly net migration is now beginning to soften from its early 2023 peak as migrant arrivals grow slower, and departures from New Zealand accelerate.

Because of the sheer magnitude of recent migrant arrivals, the uptick in departures has had little impact on the migration story. Migrant arrivals, however, are expected to stabilize over the coming years, while departures continue to grow. The outflow of New Zealanders will then have an increasingly large impact on net migration, with significant implications for the broader economy. For this reason, it is worth examining the shifting trends in departures and migrant arrivals, and the implications to our outlook for net migration.

Stats NZ estimates indicates that there were 118,250 migrant departures over the year to September 20231, the highest number on record since the series began in 2001. Migrant departures include New Zealand citizens (around 60% of total departures over the last ten years), as well as New Zealand residents from a range of other nationalities.

Chart 1 shows that total annual migrant departures are up 33% from pre-pandemic (September 2019 year) levels, with the number of departing migrants aged 65-plus more than doubling over the period. Annual departures within this age-group stepped up significantly in June 2021, rising to 41% of pre-pandemic (June 2019 year) levels and picking up further since then. This rapid increase suggests a post-pandemic shift in older people’s migration patterns, with closeness to family potentially growing in importance after a period of significant travel restrictions.

The increase in under-15 departures is also significant, as this can represent the relocation of entire families (likely with working-age parents). Annual departures in this age group totaled 13,000 in the year to September 2019 – since then, that figure has grown to 17,500.

New Zealand citizen departures over the year to September 2023 totaled 71,200, the highest annual number of Kiwi departures since 2012. However, an age-citizenship breakdown is not available in the current data.

Chart 2 shows how the substantial increase in departures over 2023 is set to lower the path of annual net migration. Kiwis have driven the rise in migrant departures. Over the year to September 2023, New Zealand citizen departures rose 59%pa, compared to a 6.2%pa rise in non-New Zealand citizen departures. The net migration losses of New Zealand citizens deepened to 44,700 over the year to September, the worst on record – and around half of this loss was to Australia.

At the same time, some momentum has begun to come out of arrivals, slowing from a peak of 400%pa over the three months to February 2023, to 80%pa over the three months to September. Over that period, growth in departures accelerated from 17%pa to 36%pa.

Although net migration is still incredibly high, this shift in trends is dragging on growth - in September, annual net migration rose by an estimated 2,710 people from August, the smallest increase since June 2022. For context, annual net migration rose by an estimated 2,572 between August and September 2019, pre-pandemic.

We expect migrant arrivals to continue coming down from a peak as labour demand eases, and stabilize between 130,000 and 140,000pa from 2025 onwards, fairly consistent with pre-pandemic levels. However, the strong profile of Kiwis leaving permanently, particularly for Australia, means we expect annual migrant departures to rise to around 110,000pa in the medium-term, compared to around 90,000pa pre-pandemic.

The exact reasons for the high number of migrant departures is hard to say for certain, but it is likely that higher and more job opportunities with a larger labour market are a strong pull. In July, the Australian government relaxed citizenship requirements for New Zealand citizens, boosting the number of Kiwi departures.

We forecast that stronger departures will squeeze annual net migration between 20,000 and 30,000pa in the medium-term, compared to around 50,000pa pre-pandemic (see Chart 2).

The strength of net migration has buoyed house prices, filled labour market holes, and, in part, kept New Zealand’s recession significantly smaller and shorter than it would have otherwise been.

But relying on population growth to drive the economy is a dangerous game. As the rate of natural increase (births minus deaths) continues to slow, and net migration expected to slip below pre-pandemic levels by 2025, sustained economic growth without a meaningful shift in productivity is impossible.

Weaker population growth as migration stabilises and Kiwis continue to leave in droves will leave us more vulnerable to a range of challenges. The migration outflow is likely to exacerbate any potential labour shortages - as already evidenced by the nursing shortage, the loss of Kiwi talent overseas can have real, and devastating effects. Lower net migration will also reduce the future demand for housing, significantly affecting the construction industry. In the longer term, challenges around our ageing population will return, as the one-off boost to the working population subsides and young families seek greener pastures.

Despite these dangers, forecasts of an increasing migration outflow are just that: forecasts. New Zealand still has the chance to create an environment that attracts and retains local talent, as well as improve productivity such that we rely less on population growth. But these changes won’t happen overnight; it is necessary, at both the government and business level, for us to actively create that environment.

2 Estimates using the 12/16- month rule: A migrant arrival is an overseas resident who arrives in New Zealand and cumulatively spends 12 out of the next 16 months in New Zealand. A migrant departure is a New Zealand resident who departs New Zealand and cumulatively spends 12 out of the next 16 months out of New Zealand.