Australia will be the choice destination for Kiwis

It’s been a while between drinks but New Zealanders are coming to Australia again in droves.

Australia recovery powers on

As Australia’s economy recovers and incomes rise, Australia is set to benefit from an influx of migration, including from New Zealand.

Australia’s latest national accounts confirmed further solid economic growth, with record-high commodity prices driving profits and incomes higher, and nominal GDP growing by more than 10 per cent over the past year, and at an annualised pace of nearly 15 per cent in the first quarter of the year.

Figure 1 – Australia nominal GDP
Figure 1 – Australia nominal GDP

These are strong numbers, and with the unemployment rate already at a 48-year low of 3.9 per cent and set to decline further, we are finally getting confirmation that household incomes are rising, particularly on a per hours worked basis.

Figure 2 – Unemployment rate
Figure 2 – Unemployment rate

Across the other side of Tasman, young New Zealanders are reportedly leaving in their thousands as borders reopen and economic conditions tighten, and Australia has historically been a key destination of choice.

Higher real incomes in Australia, and surprisingly now lower housing costs – at least outside of the two major Australian capital cities – are set to be two of the key drawcard.

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Migration reversal

The international movement to and from New Zealand has been severely curtailed through the pandemic, but now borders are reopening there be thousands of willing travellers. Historically, and particularly through the mining boom years, Australia was seen to be a more prosperous destination, and migration flows tended to be in Australia’s favour.

After the Christchurch earthquake there was a shortage of available labour for the rebuild, and as Australia’s economy slowed and ran a persistent output gap, Australia began losing migrants to New Zealand on a net basis.

Although timely data is not always reliably available, we can see that historical trends have now reasserted themselves, and Kiwis are increasingly heading to Australia.

In the early 2010s, New Zealand lost an average of 27,000 residents per year to Australia, so the numbers can be very significant.

Figure 3 – Net migration between Australia and New Zealand
Figure 3 – Net migration between Australia and New Zealand

Pent-up travel demand

New Zealand had seen record population inflows in the year to March 2020, with the country being seen as an attractive and clean ‘safe haven’ with a high standard of living.

However, New Zealand has also been a victim of its own success in some ways, as the rapid population growth has contributed to housing affordability challenges, and now a rapid rise in inflation and living costs.

The most likely cohort to relocate overseas will be younger New Zealanders seeking higher real incomes and greater employment opportunities.

There’s a huge pent-up demand for international travel, and Australia is an obvious and natural choice for Kiwis seeking their first major international trip, particularly if it’s a self-funded move with a career focus.

Anecdotally there has been a step-change in enquiries to tax agents and financial advisors about the potential implications of relocating from New Zealand to Australia.

The New Zealand government figures suggest that anywhere from 50,000 to 100,000 or more New Zealanders will depart over the year ahead, and Australia will be in poll position to welcome many of them.

The impact will be felt more keenly in New Zealand than in Australia due to the relative size of the respective populations.

If a net 20,000 New Zealanders per year were to depart for Australia over the next couple of years that creates a significant hole in housing market demand and the economy over there, whereas Australia will be able to absorb the new intake.

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