Newsroom Pro's 8 things at 8: Inflation surprise; migration tweaks hitting hoteliers; Labour to halve migration

Labour wants to slash migration, arguing that Auckland "cannot cope" with any more people. Photo: Lynn Grieveson

In today's email we detail how Labour wants to slash inward migration - but the hospitality industry says it is already feeling the pain from the governments 'tweaks'.

1. Labour would slash migration

Labour Leader Andrew Little has given his most detailed and strongest comments yet on how much a Labour-led Government would cut migration levels.

Speaking with Duncan Garner on TV3's AM programme, Little said he would target annual net migration of around 20,000 to 25,000, down from over 70,000 per year currently.

That's not quite as low as the 10,000 to 15,000 talked about by New Zealand First, but would be a substantially different policy to that of the Government and represent a major reduction if achieved.

"We're just shoving more and more people in. Auckland cannot cope anymore," Little said.

"We've got to give locals a chance first, before we bring people in from overseas. We are going to go after the work visas," he said.

Immigration New Zealand granted 192,688 people work visas in the year to June 30, 2016, up 13 percent from the year before. That included 31,766 people granted work visas under the essential skills work visas system designed to ensure any job openings are given a work test to ensure New Zealanders are not available. The remaining 160,922 were not work tested and included working holiday makers, international students and those here as family members of temporary work visa holders.

Little has yet to detail exactly how he would more than halve net migration, given most of it cannot be easily cut. New Zealand or Australian citizens cannot be told to either leave New Zealand or not come back to New Zealand.

Big restrictions to work rights for international students would hammer the $3 billion export education sector, while bilateral agreements for working holiday makers could not be changed easily.

And further restrictions to temporary work visas would significantly affect the tourism, agriculture and horticulture sectors.

As can be seen in this latest reaction to Wednesday's migration changes...

2. 'Tweaks' hammering hoteliers

Restaurant and hotel operators in Auckland and Queenstown are warning that 'tweaks' to the rules around temporary work visas are already hampering the tourist industry's efforts to welcome in an extra one million tourists over the next five years.

The hospitality industry is calling on the Government to give concessions for hoteliers in these two most popular and crowded destinations to employ migrants, given high housing and transport costs make it difficult for local workers to take up the jobs.

Roy Thompson, the co-owner of Pog Mahones Irish Pub in Queenstown and the Occidental Belgian Beer Cafe in Vulcan Lane in Auckland, told me last year's migration changes had led to 10-15 staff or up to a third of their more experienced workers leaving, and this week's changes would worsen the situation.

"We have already lost the core of our foreign working visa staff due to the last lot of immigration setting “tweaks” and are now facing a full blown crisis," he said.

Thompson called on the Government to make an allowance for those hoteliers operating in Auckland and Queenstown, where the staff shortages were most acute, and where locals were unavailable, in part because of a lack of affordable housing and public transport.

"Until we address the accommodation and transport issues, fiddling with the working visa settings like this isn’t going to make one jot of difference except to stress small businesses and worsen customer experiences," he said. See more in our full story on Newsroom Pro here.

3. 'Lower the thresholds'

Hospitality New Zealand's advocacy and policy manager Dylan Firth also told me that the new threshold of $48,859 a year or $23.49 per hour for jobs that are currently considered skilled would stop many experienced staff from being able to stay in New Zealand and hamper cafes, bars and restaurants within a year or two.

He referred in particular to line cooks or chefs de partie and duty managers as areas most vulnerable to being below the threshold, and therefore unlikely to attract and retain migrant staff.

Firth said a Hospitality New Zealand survey of wage levels paid by Auckland bars, restaurant and hotel owners to chefs de partie found they were paid an average of $18.18 per hour or $39,715 per year.

This category of worker had previously been on the long term skills shortage list and therefore eligible for an essential skills temporary work visa.

He said hospitality operators were frustrated that the threshold set in the latest tweaks was relatively high for the sector.

Firth said the Government should look at different pay thresholds for different regions, and to account for the lower pay levels for mid-range workers such as chefs de partie, duty managers and front of house managers. See more in the full story on Newsroom Pro here.

4. Inflation surprise?

Annual inflation finally rose back above the two percent midpoint of the Reserve Bank's one to three percent target band in the March quarter - five and a half years after it was last above the key level.

Vegetable, petrol and cigarette prices rose sharply, as did rents in Auckland. Underlying inflation picked up slightly, raising questions about whether the central bank will hike interest rates sooner than the end of 2019 -- which it forecast in February.

The New Zealand dollar rose around 40 basis points to 70.4 USc after the result, which was slightly stronger than expected.

Statistics New Zealand reported the Consumer Price Index rose 1.0 percent in the March quarter from the December quarter, which lifted the index 2.2 percent from the March quarter of 2016. This was the fastest annual inflation rate since the September quarter of 2011, which was the last of the quarterly inflation figures affected by the October 2010 increase in the GST rate from 12.5 percent to 15 percent.

The 1.0 percent quarterly growth rate was above the median economist forecast for inflation of 0.8 percent and above the Reserve Bank's February forecast for a 0.3 percent rise.
Economists pointed to one-off rises in fruit and vegetable prices (7.1 percent for the quarter due to weather effects), cigarettes (9.7 percent due to tax increases) and petrol (4.1 percent due to higher oil prices) as factors behind almost two-thirds of the 1.0 percent rise in the index. Annual inflation excluding food, petrol and energy, was stable at 1.6 percent.

However, higher prices for home rentals (0.8 percent for quarter) and new homes (1.0 percent) were more structural factors in the rise in inflation, along with higher than expected rises in the prices of tradable items such as furniture and furnishings (up 1.5 percent), household textiles (3.9 percent) and domestic air travel (5.7 percent).

Auckland rents rose 0.7 percent in the quarter and were up 3.1 percent from a year ago. Auckland rental inflation is up from 2.2 percent through most of 2014.

5. And a rates surprise?

But will this inflation surprise lead to a rise in interest rates? Probably not any time soon, according to the economists.

They pointed to potential growth in profit margins for retailers and ongoing pressure on house building and rent costs as factors lifting inflationary pressures.

But they said the firming was not enough to prompt any immediate lift in the Official Cash Rate, which is seen unchanged at 1.75 percent until well into next year.

"Today’s data reinforces that the next move in the OCR will be up," ANZ's Cameron Bagrie said.

"While acknowledging the uplift in some core inflation gauges, we doubt there is enough evidence in the breadth of moves to spur the RBNZ into shifting its stance just yet, especially with financial and credit conditions tightening independently of the OCR," he said.

That point is important, given both higher retail interest rates in the last six months and the rise in the currency.

6. Equal pay truce off

Well that didn't last long. After all the backslapping and cooperation between the Government and unions over the TerraNova deal earlier in the week, there might have been some expectation that the follow-up legislation on pay equity might have been more popular with workers.

That was not to be after Workplace Relations and Safety Minister Michael Woodhouse released an exposure draft of the legislation that the CTU and the Opposition said needed a complete rewrite.

"The Bill sets out a limiting mechanism for choosing and agreeing comparators for claimants which is at odds with the existing Equal Pay Act, the recent Court of Appeal Judgement and is impractical, ultimately impeding women making claims for equal pay,” CTU President Richard Wagstaff said.

7. Green electricity plan

It's not often you see BusinessNZ welcome a Green policy, but that's what happened yesterday.

Green Energy Spokesman Gareth Hughes released the party's electricity policy yesterday, which abandoned the New Zealand Power proposal from before the last election. It included $112 million in payments to help low income households over winter and only an investigation into the wholesale electricity market.

BusinessNZ CEO Kirk Hope welcomed the policy.

“This year’s policy rests more on encouraging outcomes such as renewable energy and new technology, rather than seeking to impose state controls," he said.

At the last election Labour and the Greens proposed a state-run buyer of wholesale electricity.

8. 'Show me the HAM'

For those wondering what happened to MBIE's long lost measure of housing affordability, here's an excellent piece from Henry Cooke over at Fairfax that tracks the back and forth between the ministry and the minister.