Migration surge may only have modest impact: Economist

Monthly net immigration continued to accelerate in March, to 3800, its fastest monthly pace since April 2013.

Westpac economist Felix Delbruck said the rate was even stronger than we expected, and the surprises were across the board - arrivals by both New Zealanders and foreign immigrants were higher, and departures lower.

“Annual net immigration has now surpassed the 30,000 mark.  We expect it to peak around 40,000 by the end of this year. This will provide support to the housing market through a period of rising mortgage rates, though not enough to stop the market from slowing."

He said net immigration had run ahead of Reserve Bank forecasts by about 1300 people. Governor Graeme Wheeler is expected to increase the OCR by another 25 basis points tomorrow but economists are split in their views on how aggressively he will raise rates after that.

Delbruck said: “How the Reserve Bank treats this surprise will depend on the extent to which it extrapolates the accelerating trend - it was expecting net immigration to slow by mid-2014. However, to put the surprise itself in context, statistical modelling suggests it would be worth about 0.4% in terms of extra house price inflation. That is fairly modest, and not enough to offset other factors.”