Fiscal impacts of immigration 2005/06
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Concluding Comments
This report estimates the fiscal impact of New Zealand's resident migrants on a set of government activities, and provides comparisons for the New Zealand-born.
The migrant population of 927,000 people had a positive net fiscal impact of $3,288m in the year to 30 June 2006. Migrants contributed fiscal revenue totalling $8,101m through income taxes, GST and excise duties. Income tax accounted for almost 60 percent of migrants' fiscal revenue contribution during 2005/06, with GST accounting for a further third. Estimated fiscal expenditure on the migrant population was $4,813m. This includes government spending on education, health, benefits/allowances and superannuation.
The comparable net fiscal impact of the New Zealand-born population of 3.1m people was lower, at $2,838m. The higher net contribution of the overseas-born population reflects both higher revenue per head ($8,740 versus $7,990 for the New Zealand-born population) and lower expenditure ($5,190 versus $7,070).
The net impact in this study can be compared to BERL's previous study in 2003 on the impact of migrants in the 2001/02 year. After removing the effects of inflation, the net fiscal impact of migrants increased by a total of 80 percent in real terms, which is an average of 16 percent per annum. This growth reflects increases in both revenue and expenditure. The former grew by 29 percent (7 percent per annum) and exceeded expenditure growth of 8 percent (2 percent per annum).
This study shows that all migrant groups had a positive net impact. The impacts of particular migrant groups differed by the duration of residence, region of birth and region of residence in New Zealand. The net fiscal impact of migrants climbs with duration, and appears to be connected with the increasing age profile of these groups. The net fiscal impact per head was $2,680 for recent migrants, $3,470 for intermediate migrants and $4,280 for earlier migrants. The net fiscal impact for the New Zealand-born population was $915 per head.
Migrant groups from different regions of birth had diverse personal and social characteristics, affecting the fiscal impact of these groups. The net impact per head ranges from $1,990 for Pacific Island immigrants to $4,850 for immigrants from the UK and Ireland. Duration of residence, however, has a strong effect on the earning and expenditure profile of each regional group. The total contribution increases with duration for all groups but migrants from the Other region category. The net impact per capita of earlier Pacific Island migrants is almost 14 times larger than that of recent migrants. In contrast, the net impact per capita for migrants from the UK, Ireland, Europe and North America is higher for recent migrants than earlier migrants.
The significance of the contribution made by recent migrants from Asia may be somewhat underplayed. Around 47 percent of this group who were older than 15 years were participating in education. This rate was substantially higher than any other group. It is expected that a large portion of this group would pay full fees.
In terms of region of residence in New Zealand, migrants to the Auckland region dominate the overall fiscal impact, as this region is home to over 45 percent of all migrants in New Zealand. The immigrant population tends to shift out of the metropolitan cities of Auckland and Christchurch to Wellington, the Rest of North Island and Rest of South Island regions as it becomes established. As the net impact of migrants overall increases with duration of residence, the movement of migrants out of the northern- and southern-most metropolitan centres leads to regional variation in the impact of migrants.
The occupational analysis of migrants indicates that migrants tended to move to higher paid occupations such as legislators, administrators and managers as duration of residence increases. While this may reflect increasing integration into New Zealand society, such career shifts are also likely to reflect the age profiles of the migrant groups.
Overall, a higher proportion of migrants was unemployed or not in the labour force than the New Zealand-born. As expected, this proportion was lower for intermediate migrants than for recent migrants, which may indicate that it takes time to integrate into the New Zealand labour market. This may also reflect differences in study participation rates, which tended to fall with duration of residence. The earlier migrant group had the largest proportion of people unemployed or not in the labour force, which is likely to reflect its high proportion of retirement aged people.
There appear to be differences in the occupational mix of migrants according to their region of birth. This may reflect differences in the entry criteria for migrants from different regions. There does not appear to be a strong effect on the occupational mix by region of residence.
The final section of the study complements the main snapshot focus of this project by considering the long-run impact of migrants. It suggests how a production function framework may be used to examine the impact of immigration on the structure and performance of the economy. This framework incorporates variables such as natural resources, labour, capital and technology. It allows both qualitative and quantitative evaluations of the impact of immigration on the economy as a whole. The discussion in this section of the report highlights a range of consequences from immigration, including how it may affect resource availability and use, the dynamism of the economy and how the New Zealand economy connects with the rest of the world.