Finally, after months of debate about the effects of record high net migration on house prices, school and hospital waiting lists and weak wage inflation, the Government has acted to reduce its permanent residency planning range to its lowest point in a decade and is reviewing the number of people arriving on temporary and student visas.
Michael Woodhouse announced the change earlier this afternoon, sparking immediate accusations from Andrew Little of a flip-flop and from Winston Peters that the Government was reacting to polling pressure with mere tinkering.
Woodhouse described the policy shift as "changes at the margins," but the changes are a significant reduction in the likely percentage of successful applications and a significant increase in the number of points needed for permanent residency under the skilled migrant category. It also applies an immediate and complete halt to applications from parents of permanent residents and toughens the English language requirements for migrants.
Woodhouse announced the Government had reduced its planning range for permanent residencies by around 5% or 5,000 to between 85,000 to 95,000 for the next two years (down from 90,000 to 100,000 for the last two years). The planning range has averaged between 45,000 to 50,000 per year for over a decade so this change sets the range at the low end for that decade. There were over 52,000 successful applications last year, suggesting the 'run rate' could be cut by significantly more than 5% over the next two years.
Lots of disappointed students and PTE agents?
The decision came after permanent residency approvals surged in the year to June 30, 2016 to 52,052 from 43,085 the previous year, and ahead of a bow wave of applications for permanent residency from people already here on temporary work visas and student visas. More than 70% of successful applications for permanent residency come from those already in the country on such temporary visas, and work and student visa numbers jumped from around 45,000 per annum in early 2014 to over 60,000 by early 2016.
This created the risk that many international students would apply for permanent residency, increasing pressure on the target range for permanent residencies. The retention rates of student and work visa holders to residency after five years over the last decade are 22% and 29% respectively. By cutting the target range, increasing the points threshold and suspending parental applications, the Government has created a risk that many students and temporary visa holders who are already here will find it harder to get permanent residency.
This will disappoint many who had expected or planned to get permanent residency, and frustrate those who are promoting export education in New Zealand as a pathway to residency. MBIE and Treasury have said almost 40% of the applicants for permanent Skilled Migrant Category visas were former international students on temporary work visas.
Treasury in particular has warned about the risks that a higher proportion of lower skilled permanent migrants may be pressing down on wages, preventing people on benefits transitioning into work and collectively dampen productivity growth. See more here in my June 13 column on 'The problem with Chefs'.
NZIER's QSBO last week showed that employers were finding it easier to find unskilled labour, which NZIER and ANZ economists said was linked to Auckland being the main destination for international students and those with temporary work visas. See more here in last Wednesday's Hive News.
Woodhouse increased the number of points needed for skilled migrants to 160 from 140, reducedthe number of places for family reunifications to 2,000 per year from 5,500 per year and temporarily closed the parent category to new applications. He did not say when the parent category would be reopened, although later indicated he hoped it could be re-opened in the middle of 2017.
"Increasing the points required to gain residence from 140 to 160 will moderate the growth in applications in the Skilled Migrant Category and enable us to lower the overall number of migrants gaining residence," Woodhouse said.
“Raising the points will also prioritise access for higher-skilled SMC migrants, ensuring we strike the right balance between attracting skilled workers that allow companies to grow and managing demand in a period of strong growth," he said.
New English language tests
That document showed there would also be changes to the English language tests. It said skilled migrant category applicants would have to show evidence they meet the English language requirements, "which will require more people to undertake formal tests."
Previously, immigration officers could excuse an applicant from having to take a formal English Language Testing System (IELTS) test and get a 6.5 score on that test, as long as the applicant had a recognised qualification where the medium of instruction was English, or one year of skilled employment in New Zealand or could show other evidence that the applicant was a competent user of English.
"People who are invited to apply from 12 October onwards will not be able to use the same alternative evidence of English language in place of a test as previously," Immigration NZ said.
New applicants not able to take the IELTS test will have to show they are citizens of Canada, the Republic of Ireland, the United Kingdom or the United States of America, or have a qualification comparable to a level 7 bachelor's degree from one of those countries and Australia. From November 21 a range of other English language tests will also be used.
Temporary and student visa review
Woodhouse also later revealed to reporters the Government was reviewing the number of temporary work visas that were issued after work tests and was reviewing student visa numbers.
Asked about temporary work visas, he said: "That's another body of work, so the labour market tested and central skills work visas is subject to a review, and I'm hoping to complete that in the not too distant future."
Woodhouse rejected comments from Andrew Little that too many temporary work visas were issued, preventing New Zealanders from getting jobs and pressuring down on wages.
"There are fewer labour market tested work visas being issued now than there was when his party was in power, and we are reviewing that constantly, but I am hoping to bring some changes into place in the not too distant future," Woodhouse said.
Asked about untested work visas for those on working holidays, he said: "They are continuing to support a aggressively growing hospitality and tourism sector in places like Queenstown and Rotorua, so I don't think there are any plans to remove what are effectively bilateral relationships with our partner countries like the United Kingdom, Ireland, Germany and so, where people are coming and enjoying the benefit of that mutual access."
"What I want to do is to make sure we have the right people to continue to support a very strongly growing economy and that's what we'll be doing," he said.
"The best sign is of that is whether they're not getting work or not enjoying their experience in New Zealand. There's nothing to suggest that that's not the case. If you were to go to places like Queenstown and Rotorua and our horticulture sector they would say that they're all needed."
Asked again about temporary work visas, he said: "You're talking about the temporary space and we'll have a conversation about that later in the year. What I've attached today are small changes at the margins for a very successful residency programme."
Asked about student visas, he said: "I'll deal with that later in the year."
Problems with parent migrant applications
Woodhouse said he had been concerned about the quality of some of the parent category visa applications, and in particular "the commitments that have been made by both them and their children about support, wherein after gaining residence they are not in a position to sustain themselves."
"So I want to review that and in the meantime we are just going to put a pause on that category," he said.
'No evidence of wage suppression'
Woodhouse also repeated comments about little evidence being seen of wage suppression or of substitution for local workers, despite fears by Treasury and MBIE that this was happening.
"There is a concern that there might be a form of wage suppression. We're watching that closely. We don't believe the evidence is there that that's the case, particularly when there is high demand for labour. People have choices about where to work," he said.
"The evidence isn't there. Treasury and MBIE are working very hard to understand that issue, but in a very strongly growing economy when people do have choices about where they work, and where we are working extremely hard to ensure that Kiwis are at the front of the queue for those jobs, then the evidence just doesn't exist at this stage."
'A flip-flop that was poll-driven'
Andrew Little said he was not convinced the changes would rectify the mismatch workers and unions were seeing in the labour market where lower skilled and non-work-tested temporary migrants were taking jobs that New Zealanders could get, and were suppressing wages.
"The problem we've seen is that the way they run the system there's no check or oversight on that at all and so we're bringing in people to do roles that the evidence suggests a lot of New Zealanders could be doing and are currently unemployed," he said.
"It's a flip flop on their part and they're doing it under pressure, and I'm not convinced that it's actually solving the problems that we know exist," he said.
Winston Peters said the Government had been panicked by what it was seeing in the opinion polls, and was now only tinkering with the settings in a way that would not solve the problem of migration being too high.
"John Key denied in the House that parent migrants are a concern, while Tertiary Skills and Employment Minister Steven Joyce said they had the right mix for skilled migrants coming here. So why the sudden change?" Peters said.
“The plain fact is after years of denial, their polling is telling them the public are concerned. National have created a massive problem by bringing in huge numbers of unskilled migrants, and the Parent Category has meant their parents have flooded in also," he said.
Peters pointed to the arrival of 87,000 parent migrants over the last 15 years "who have no requirements to contribute to the economy while they receive free access to public health immediately, and superannuation after just 10 years here."
We'll have more reaction and detail tomorrow morning.