Exodus to Australia Risks N.Z. Labor Shortage

An unprecedented outflow of New Zealand citizens last year for jobs and better pay in Australia is leaving the nation’s earthquake-hobbled economy vulnerable to a labor shortage during rebuilding.

An all-time high of 45,863 citizens permanently relocated to the country across the Tasman Sea in the year ended Dec. 31, Statistics New Zealand said in a report released today in Wellington. The number who opted to return was the lowest in three years.

The flight of laborers suggests the nation may face a skills shortfall when it needs workers for an estimated five years of reconstruction in the South Island city of Christchurch after a series of quakes since September 2010. Central bank Governor Alan Bollard, who is monitoring rebuilding to assess when to raise interest rates, last week said the exodus means companies need to fight to find and retain staff.

“The real issues that this repair and the city rebuild are going to suffer is inflation around labor and retention of people,” David Peterson, general manager of Fletcher Earthquake Recovery in Christchurch, said this week.

The company, a unit of Fletcher Building Ltd. (FBU), New Zealand’s largest construction company, is managing about 3,500 workers in a project to repair at least 100,000 homes over the next four years. Peterson said in an interview Jan. 30 he will need twice as many workers within two years and is already recruiting in the U.K. and Ireland.

$1,418 a Week

Money is the main lure to Australia, where the unemployment rate of 5.2 percent compares with New Zealand’s 6.6 percent. The average weekly wage in New Zealand of NZ$1,013 ($843) is 40 percent less than Australia’s A$1,323 ($1,417).

Another reason for the departures is the ground around Christchurch won’t stop shaking.

The city and surrounding districts have been rocked by more than 10,000 temblors in the past 16 months, including a quake Feb. 22 that killed 181 people and closed the central business district. As many as 1,000 city buildings and more than 6,500 homes are being demolished, while at least 130,000 homes need repairs.

Permanent departures overseas from Christchurch rose to 7,167 from Feb. 23 to Dec. 31, compared with 4,769 in the year- earlier period, according to government figures.

Departures to Australia will increase in the next year because of “the lagged effects of recent strength in the Australian labor market,” New Zealand’s Labor Department said in a report yesterday.

Election Issue

The department’s report follows criticism of Prime Minister John Key during last year’s election campaign for failing to stem immigration to Australia as he had pledged in 2008.

Still, departures to Australia are forecast to ease in 2012 as employment prospects in New Zealand improve, the department said. Departures are about 1 percent of the population, compared with 1.2 percent in 1988 and higher ratios in the late 1970s, it noted.

Bollard last week said economic growth may be slower this year than he previously forecast because the rebuild is taking longer to start. He expects reconstruction “in earnest” from 2013 rather than the second half of 2012, he told a business audience on Jan. 27.

Rates on Hold

As a result, the central bank is “not uncomfortable” with expectations that the official cash rate will stay at a record- low 2.5 percent through this year, Bollard said after his speech. There is a 32 percent chance of a rate cut by June, according to swaps prices from Westpac Banking Corp. (WBC)

Net immigration to all nations by New Zealand citizens rose to 36,454 last year, the most since 2008, according to government figures.

“We do lose a lot of skilled people,” Bollard told reporters on Jan. 27. “It’s getting worse, not getting better and it’s a challenge we share with a whole lot of other countries.”

Construction workers are mobile and local companies “have to fight to keep staff,” he said, adding that businesses will tap South Africa, Ireland and other nations that have construction workers to spare.

“Skills like that are portable,” Bollard said. Local firms “will definitely access people and they’ll be able to get them into New Zealand much easier than in the past.”

Work Visas

New Zealand accepted 9,400 people for residence in the three months ended Sept. 30, according to Labor Department figures. The total includes about 4,370 approved as skilled migrants who have job offers. An additional 37,400 were accepted on temporary work visas, it said.

A three-hour flight from the nearest developed economy, New Zealand has endured prior periods of fleeing migrants. During the early 1980s, another period when Australia was a population destination, then-Prime Minister Robert Muldoon quipped: “New Zealanders who emigrate to Australia raise the IQ of both countries.”

New Zealand’s economy will grow less than 3 percent this year, Bollard said last week. Australia’s gross domestic product may expand 3.25 percent in 2012, according to Bank of America Corp.’s Merrill Lynch division.

“There’s no real reason to stay in New Zealand if prospects are better elsewhere,” said Annette Beacher, head of Asia-Pacific research at TD Securities Inc. in Singapore. “If you are out of a job waiting for Christchurch to be rebuilt, you could go broke waiting.”

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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