“At this stage the one month downturn in net migration is just that - a monthly statistic. If it were to become the pattern for the next 12 months or so then it would mark a significant downturn in the demand for housing and would provide a significant dent in domestic demand growth,” ASB says.
“This, in turn, would provide more certainty that the inflation rate will return to levels closer to 2% p.a. and allow the RBNZ to ease monetary policy, possibly early 2006.”
The latest figures show net migration was -90 people in July, seasonally adjusted, a sharp reduction from the average 558 net inflow per month during the first six months of the year. The net inflow for the year ending July was 6888, the lowest annual net inflow since November 2001.
ASB says it is too early to signal any change in the migration pattern.
“Recall the Government has recently met and re-set their residency approval target. Also, a third piece of information, namely New Zealand short-term departures, indicates that the New Zealand household sector was very willing to undertake more expenditure on a large and discretionary item in July. In that sense, there are still signs that the domestic spending momentum is intact.”
The bank says that at this stage the outlook remains for a gradually slowing housing market and a slower growth but for the Reserve Bank to retain a hawkish stance throughout this year.
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