Don't be too 'asty

The government has tapped the brakes on migration flows, for what commentators have assessed as essentially political reasons (see, for example, Duncan Garner on Stuff or Fran O'Sullivan in the Herald). 

But as Fran said, "The balancing act that Key has to apply is how he gets across the fact that New Zealand is dependent on immigration and ensures the doors to skilled people remain open". And that's getting a bit trickier, as some data today suggested we may be more imminently dependent on ongoing strong immigration flows than you might imagine.

The data were in the latest BusinessNZ/BNZ Performance of Services index, which showed the services still growing at a handy pace, though a tad less strongly than in August. In its commentary, the BNZ has flagged the possibility that difficulty in finding staff could be starting to hold firms back from continuing  to expand. In the graphs below, the bank has juxtaposed the composite index covering both services and manufacturing (the 'PCI') with GDP growth - there's usually a close fit - and said there's "the hint, from the PCI, that growth may be slowing". And below that, it put up the latest readings from the NZIER's Quarterly Survey of Business Opinion, which as the NZIER said, showed that "Firms report increased difficulty in finding labour, and this may have limited the extent to which firms could increase headcount over the past quarter. The difficulty in finding labour is particularly acute for skilled labour, with shortages at levels not seen since December 2007".

Sure, migration is a touchy issue in a lot of places right now, and one's that's backing generally economically responsible governments into places they wouldn't normally go: in the UK, for example, the Conservative government recently flirted with the tackily unpleasant idea of "naming and shaming" British companies that hire people from overseas (they've since had to backtrack). 

All I'd observe (as I've said before) is that the labour market is rather tighter than you would think from a 5.1% unemployment rate. Mucking about with the supply of staff from overseas might make political sense. But if it threatens to get in the way of the already limited ability of businesses to find the people they want, it's not likely to be economically costless.