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Speaker 1: Kyota. I'm Susie ordqwitzt and for Chelsea Daniels. And this

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Speaker 1: is the Front Page, a daily podcast presented by the

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Speaker 1: New Zealand Herald. New Zealand is a country of immigrants,

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Speaker 1: with tens of thousands of people moving here each year.

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Speaker 1: We are also a country of travelers, and those new

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Speaker 1: arrivals help make up for the population shortfall as Kiwi's

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Speaker 1: migrate overseas. Due to the stream of migrants in recent years,

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Speaker 1: our population has been steadily growing, but new forecasts from

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Speaker 1: one economist predicts net migration may slow to zero by

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Speaker 1: twenty twenty five. So if the number of new arrivals

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Speaker 1: is even with the number of long term departures, what

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Speaker 1: impact will that have on our economic growth? Today on

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Speaker 1: the Front Page, we are joined by Westpac Senior economist

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Speaker 1: Michael Gordon to discuss his immigration projections alongside New Zealand

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Speaker 1: Herald Business Editor at Large Liam Dan. Michael, what are

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Speaker 1: your projections around immigration and New Zealand.

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Speaker 2: Well, we're expecting it to slow actually quite a bit

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Speaker 2: from where it has come from. You may remember even

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Speaker 2: less than a year ago we were seeing net inflows

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Speaker 2: of peaked at over one hundred and thirty something thousand people.

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Speaker 2: It's now slowed to I think in the last year

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Speaker 2: about sixty seven thousand, but the monthly paces is dropping

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Speaker 2: off and we expect that to continue on further and

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Speaker 2: actually getting down to probably a balanced outcome really over

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Speaker 2: calendar twenty five. So within that that would imply that

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Speaker 2: at some point we're going to see some minuses come

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Speaker 2: through on the monthly numbers.

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Speaker 1: Okay, so net zero migration effectively, what do you mean

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Speaker 1: by that.

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Speaker 2: Well, that just means we have as many people leaving

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Speaker 2: as arriving. Now, within that balance, there tends to be

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Speaker 2: I think two big groups that drive that balance is

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Speaker 2: the foreign arrivals and then there's the departures of New Zealanders,

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Speaker 2: and they tend to go through the same kind of

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Speaker 2: cycles because they're really reflecting the economic conditions and I

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Speaker 2: guess especially relative economic conditions here versus Australia, because that's

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Speaker 2: a common destination for New Zealanders and it's also a

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Speaker 2: close alternative for people coming from places like India or

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Speaker 2: China or the Philippines when they're looking to move to

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Speaker 2: a richer country.

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Speaker 1: So the number of people coming in will balance the

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Speaker 1: number of people going out. This is a pretty big call.

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Speaker 1: What led you to this?

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Speaker 2: It's really are just a continuation of the trends we're

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Speaker 2: seeing now. So since that peak in those numbers of

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Speaker 2: over one hundred thousand people, we've seen mostly the foreign

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Speaker 2: arrivals have come off from their highs, and New Zealand

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Speaker 2: tends to have some very big cycles in those net

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Speaker 2: migration figures. Anyway. A big part of that is that

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Speaker 2: increasingly a lot of the people who arrive are not

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Speaker 2: so much permanent migrants, but they are considered long term,

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Speaker 2: staying here for more than a year. And it's people

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Speaker 2: that are coming on time limited visas like student visas

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Speaker 2: or work visas. A lot of them will come with

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Speaker 2: the hope that they can stay here longer term. Not

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Speaker 2: all of them will be able to, and especially if

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Speaker 2: the jobs dry up, then people who are on work visas,

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Speaker 2: you know, if they're sort of tied to assertian employer

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Speaker 2: and the employer is laying people off or maybe going bust,

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Speaker 2: you know, they may be forced to go home again.

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Speaker 2: I think that's probably the biggest change that we've seen

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Speaker 2: this year is there has been a really notable pick

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Speaker 2: up in the number of those recent arrivals who are

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Speaker 2: leaving again. We've got the normal cycle, but all of

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Speaker 2: this has been compounded and I guess exaggerated by COVID.

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Speaker 2: So we had a lot of people that were really

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Speaker 2: waiting for the border to reopen for the opportunity to

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Speaker 2: make their move. That happened in both directions, but especially

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Speaker 2: in terms of their arrivals. There was this big catch

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Speaker 2: up flow that's slowed. But also we've had a lot

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Speaker 2: of recent arrivals that may be in fairly unsecure positions

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Speaker 2: and you know, we're starting to see them leave again.

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Speaker 1: Do you have any figures that speak to those recent

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Speaker 1: arrivals who are leaving again soon after?

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Speaker 2: Not really. Unfortunately, we don't have a lot of visibility

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Speaker 2: over people leaving, and in large part that's because New

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Speaker 2: Zealand got rid of the departure cards in twenty eighteen.

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Speaker 2: So for instance, we're not collecting any information on what

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Speaker 2: sort of jobs they're leaving from. For instance, we do

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Speaker 2: have some information about age, we don't have a great

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Speaker 2: sense even of where they're going, necessarily because the information

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Speaker 2: that we get records where their flight lands. So for instance,

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Speaker 2: someone who's going to do their oe in London probably

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Speaker 2: won't be recorded as going to London. They'll be recorded

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Speaker 2: as going to Singapore or Hong Kong or something like

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Speaker 2: that where they have a layover. But in the past,

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Speaker 2: when we have had information on the kinds of people leaving,

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Speaker 2: we probably have more of a sense of the kiwis

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Speaker 2: that are leaving, and they tend to be a bit

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Speaker 2: of a cross section really of society. It's not necessarily

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Speaker 2: the best and brightest, it's just it tends to be

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Speaker 2: actually people who are over thirty, often with children, and

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Speaker 2: they're really moving to opportunity, so you know, perhaps they're

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Speaker 2: looking for a similar job with better pay.

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Speaker 3: While the under twenties are eight percent better off in

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Speaker 3: New Zealand, at every other age group, the difference grows

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Speaker 3: to about twenty percent in the favor of Australia. Adding

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Speaker 3: fuel to the fire, Let's also consider that Australian employers

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Speaker 3: at eleven percent of super on top of these wages,

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Speaker 3: while in New Zealand we're get a poultry three percent. Clearly,

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Speaker 3: with the best available data from both countries' governments, Australia

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Speaker 3: has more money to offer kiwis of all age groups.

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Speaker 1: Liam It wasn't that long ago we were talking about

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Speaker 1: this immigration boom, Like Michael touched on there, why this

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Speaker 1: sudden turnaround.

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Speaker 4: Yeah, it's pretty dramatic. I mean I tend to get

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Speaker 4: a bit excited about immigration. I sourced a lot of

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Speaker 4: Michael's work. He was the first economist I saw who

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Speaker 4: picked that we were going to go through this incredible

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Speaker 4: one hundred thousand net gain, which we smashed through. But

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Speaker 4: when he made that call, people were like a bit

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Speaker 4: you know, open mouthed at the time. So, yeah, from

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Speaker 4: an incredible record number to what now looks like sort

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Speaker 4: of net zero is a huge turnaround. I mean, I

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Speaker 4: guess part of that is all this pent up demand

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Speaker 4: from COVID, so as Michael says, that's exaggerated. You know,

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Speaker 4: we had an outsized number of people waiting to get

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Speaker 4: in and people waiting to get out. But also I

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Speaker 4: assume a lot of it is just jobs in the economy.

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Speaker 4: So we know that the New Zealand economy, as interest

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Speaker 4: rates went up, came off really fast, and we went

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Speaker 4: from a labor shortage to a situation where unemployment from

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Speaker 4: sort of near record lows started to rise and is

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Speaker 4: expected to keep rising. So there really in a lot

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Speaker 4: of cases it just doesn't jobs to come to. So

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Speaker 4: that's going to immediately dampen and also create an incentive

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Speaker 4: for some people to leave.

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Speaker 1: Is one of the factors though, that New Zealand isn't

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Speaker 1: an appealing place to live anymore.

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Speaker 4: Well, I mean, you know that's underpin by job. So

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Speaker 4: you could talk about Christoph Luxeen and his mojo. He's

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Speaker 4: talked a lot about bringing New Zealand's mojo back and

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Speaker 4: the idea that we've sort of lost a bit of

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Speaker 4: a spot as a star in the world's view. You know,

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Speaker 4: may like our tourism hasn't come back as fast as

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Speaker 4: people would have hoped, But you know, at the end

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Speaker 4: of the day, it's a big call to move your

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Speaker 4: family or move yourself across the other side of the

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Speaker 4: world and set up your life and all that sort

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Speaker 4: of thing. And I think it really is underpinned by

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Speaker 4: jobs and an opportunity. So the New Zealand economy has

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Speaker 4: been through this absolute roller coaster as well, and so

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Speaker 4: you're sort of seeing that reflected in the migration numbers.

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Speaker 1: Michael, do you think New Zealand's lost its mojo?

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Speaker 2: Well, I think it's an economic cycle. We've been through

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Speaker 2: these before. It's been I think not entirely normal because

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Speaker 2: we've had this very strange disruption from COVID, and as

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Speaker 2: it has affected the economy in unusual ways, so I

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Speaker 2: think it's also had unusual impacts on the migration trends.

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Speaker 2: I mean, I think speaking more broadly about the economy,

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Speaker 2: you know, we've had effectively two years of GDP flat

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Speaker 2: to down slightly. If you measure that in per person terms,

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Speaker 2: it looks like it's gone back quite a bit because

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Speaker 2: we have had that quite strong population growth in the meantime.

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Speaker 2: In terms of the peak to trough fall in per

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Speaker 2: person GDP, it looks quite large. But we were coming

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Speaker 2: from a quite overheated starting point. I mean, COVID. I

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Speaker 2: think we're probably not going to get agreement on this point.

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Speaker 2: But COVID was really mainly a disruption to how we

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Speaker 2: do business. If someone described it to you that way,

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Speaker 2: you'd say our GDP should have fallen when COVID hit,

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Speaker 2: and it didn't actually rocketed away once we came out

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Speaker 2: of lockdown, And that was really just speaking to the

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Speaker 2: amount of stimulus from low interest rates and from government

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Speaker 2: spending that was really you know, turbo charging the economy.

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Speaker 2: At a time we were facing this effectively big capacity constraint.

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Speaker 2: So you know, we've come from this very overheated starting point.

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Speaker 2: Some of that was necessary. I don't know if you

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Speaker 2: can really truly say where the economy would be now

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Speaker 2: if we'd never had COVID, because so many other things

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Speaker 2: would have been different. But I suspect we are probably

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Speaker 2: to some degree, you know, coming back to where the

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Speaker 2: trend of where we would have been without COVID.

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Speaker 1: Anyway, this must be a worry though, because immigration is

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Speaker 1: critical to our country success, right.

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Speaker 2: I don't know. I mean I take maybe a more

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Speaker 2: neutral view of migration than the average person. I mean,

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Speaker 2: I think migration, firstly, just some degree is a vote

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Speaker 2: of confidence in our economy. You know, both in terms

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Speaker 2: of people who want to come here and also you

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Speaker 2: know whether the Kiwis want to stay or try their

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Speaker 2: luck in Australia or the UK or whatever. I mean.

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Speaker 2: People they move to opportunities. It tends to be what

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Speaker 2: drives it. So there's the relative appeal of New Zealand's

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Speaker 2: a relatively rich country, but not as rich as Australia.

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Speaker 2: But you also get cycles driving it as well, So

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Speaker 2: I think there's probably actually quite a big cyclical aspect

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Speaker 2: going on, and that's coming back to that overheated economy

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Speaker 2: and that inflation fight that you know, maybe would have

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Speaker 2: panned out differently if we hadn't had the whole COVID thing.

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Speaker 1: When was the last time we saw a loss of population?

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Speaker 4: Over the long period of New Zealand's history, we've bounced

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Speaker 4: in and out of net migration gains and net migration losses.

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Speaker 4: I do know that we had a long period between

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Speaker 4: nineteen seventy six and nineteen ninety two, which was a

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Speaker 4: really rough time for our economy. We were in and

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Speaker 4: out of recession a lot. We had a lot of

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Speaker 4: on average, i'd say, a net migration loss across that period.

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Speaker 4: There was some big net migration losses across that period,

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Speaker 4: and that's when we coined the term brain drain and

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Speaker 4: Rob muldoon made a funny joke about raising the intelligence

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Speaker 4: of both countries when people went to Australia, which wasn't

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Speaker 4: really funny because we were losing people. And I accept

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Speaker 4: that per capita GDP is an important measure, but I'm

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Speaker 4: seeing a lot of people using it at the moment

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Speaker 4: in a way to suggest that things are really terrible,

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Speaker 4: and actually it will resolve itself because we won't have

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Speaker 4: people coming in. And that period where we didn't have

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Speaker 4: population gain was actually worse for New Zealand because we

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Speaker 4: were facing recessions and also struggling with you know, not

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Speaker 4: enough people to buy things, you know, prop up the economy.

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Speaker 1: Speaking about people, the average person on the street, Michael,

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Speaker 1: how could net zero migration impact them. I'm thinking in

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Speaker 1: terms of the housing market, employment, things like car sales.

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Speaker 2: I think for the average person, they may not actually

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Speaker 2: notice it a lot. It's one of these funny things

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Speaker 2: where I mean, if you think about migration booms, they

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Speaker 2: add to both demand and supply in the economy, but

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Speaker 2: you often only hear about one leg or the other.

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Speaker 2: And I think that's maybe just a reflection of you know,

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Speaker 2: which voices get prioritized. So a couple of years back,

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Speaker 2: it was really businesses, you know, screaming out about worker

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Speaker 2: shortages and rarely pushing for you know, reopening the border

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Speaker 2: and loosening up the work visa requirements and someone to

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Speaker 2: try and get more workers and so try and get

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Speaker 2: the supply side up. But I think as as an

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Speaker 2: economist and obviously but not the normal person anyway. But

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Speaker 2: I was looking at this and going, well, walking on,

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Speaker 2: every single employer is screaming labor shortages. It's not particular

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Speaker 2: skills that we're missing, it's just everyone does not have

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Speaker 2: enough workers to meet the amount of work they've got

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Speaker 2: on That actually sounds like an excess demand problem to me,

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Speaker 2: not a supply one. But the narrative was all about

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Speaker 2: or we don't have enough people, we don't have enough workers,

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Speaker 2: when you know, in reality, adding more people to the

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Speaker 2: country is just going to add to demand. And if

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Speaker 2: the problem is that demands already overheated, that's not really

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Speaker 2: fixing it. So it might be one the kind of

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Speaker 2: thing that you know, individual employers notice. It might be

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Speaker 2: a couple of years down the track when the economy

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Speaker 2: is picking up again and they may find, oh no,

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Speaker 2: actually I'm struggling to find people again. Can we bring

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Speaker 2: in some more migrants For the average person, Probably not

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Speaker 2: so much, because it's the effect kind of gets diluted

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Speaker 2: across just the sheer size of the population.

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Speaker 1: Could the fallen migration fix unemployment in this country?

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Speaker 2: In part A responds to it anyway with a bit

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Speaker 2: of a lag, But for instance, the number of New

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Speaker 2: Zealanders leaving has quite a strong relationship with the unemployment

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Speaker 2: rate difference between New Zealand and Australia, so it's just

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Speaker 2: really reflecting job prospects. So you can think about, oh,

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Speaker 2: you know, there's better pay in Australia, better wheather, et cetera.

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Speaker 2: But that sort of doesn't explain why there are cycles.

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Speaker 2: You know, if pay was the only consideration, then why

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Speaker 2: would anyone stay? Why would any of us still be here?

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Speaker 2: The fact is we do get cycles, and a lot

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Speaker 2: of it comes down to, I guess the relative strength

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Speaker 2: of the jobs markets here and there, and we're in

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Speaker 2: a I think relatively unusual situation where the jobs markets

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Speaker 2: softening in New Zealand is holding up fairly well in Australia,

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Speaker 2: so we are seeing a lot of people going over there.

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Speaker 2: You know that there are other times when, say, if

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Speaker 2: we see a global recession and you know both countries

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Speaker 2: job markets are softening, people tend to stay at home

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Speaker 2: because if you're going to be unemployed, you may as

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Speaker 2: well be unemployed in your home country. So there's a

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Speaker 2: couple of different factors going on there. But essentially, right now,

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Speaker 2: I think the strength of the Australian jobs market is

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Speaker 2: acting as a bit of a release valve for unemployment here.

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Speaker 2: If we didn't have that, if people for some reason

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Speaker 2: weren't allowed to leave the country, we would probably have

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Speaker 2: higher unemployment rate than we've see now.

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Speaker 1: Homeowners are holding on for a revival in the housing market,

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Speaker 1: which is looking more likely with interest rates starting to drop.

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Speaker 1: What as almost suition now if things don't change, is

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Speaker 1: that there will be a couple of cuts this year,

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Speaker 1: and then it'll be almost like a domino. We're going

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Speaker 1: to keep seeing cuts over the next year eighteen months.

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Speaker 1: That may take the rate down to more like two

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Speaker 1: point seven five from the.

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Speaker 2: Current five point five.

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Speaker 1: So that's really good news. It's just a matter now

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Speaker 1: of it's a matter of it. It's a matter of

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Speaker 1: when is your forecast likely to threaten that revival.

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Speaker 2: The migration forecast. I don't think so, just because a

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Speaker 2: lot of the variation in how surprices firstly comes from

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Speaker 2: interest rates. So we're now seeing a new phase in

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Speaker 2: the interest rate cycle where they are starting fall. The

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Speaker 2: effects of that will become apparent over the next year

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Speaker 2: or so ahead. Migration tends to be a little bit

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Speaker 2: subtle because you're kind of talking about small differences in

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Speaker 2: the population growth rate versus small differences in the rate

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Speaker 2: at which we're increasing the housing stocks. So it might be,

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Speaker 2: you know, two percent population growth plus one percent increase

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Speaker 2: in the number of houses. There's an imbalance there, but

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Speaker 2: it's a fairly subtle one and it takes a bit

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Speaker 2: of time to build up. I think with so what

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Speaker 2: we're forecasting in terms of the migration numbers, it is

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Speaker 2: more of a short lived cyclical thing. So when I

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Speaker 2: talked about you know, we might see some net outflows

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Speaker 2: at some point, it's not something that would really be

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Speaker 2: for a sustained period like that period in the seventies

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Speaker 2: and beyond that or even I think that probably the

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Speaker 2: last time that we really saw sustained outflows on balance

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Speaker 2: was the early twenty tens, and some of that was

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Speaker 2: reflecting the shock of the christi At earthquakes as well

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Speaker 2: as the state of the economy. We're talking something that's

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Speaker 2: a bit more short lived than those previous periods.

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Speaker 1: Liam. We're being told to survive until twenty twenty five,

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Speaker 1: that things will be better next year. Will things be better?

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Speaker 1: In your view?

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Speaker 4: I think there's a lot of expectation around lower interest rates. Yeah,

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Speaker 4: I guess I just feel that, you know, it's quite

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Speaker 4: a dramatic shift from a record high at one hundred

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Speaker 4: and thirty six thousand coming in to maybe net zero,

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Speaker 4: and it presents probably is a little bit of a headwind.

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Speaker 4: I mean, I don't think the residential housing market is

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Speaker 4: going to be massively dampened by it, but around apartments

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Speaker 4: and apartment construction, that may be an issue because you know,

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Speaker 4: we have actually got a bit of an oversupply of

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Speaker 4: apartments and so if you haven't got people coming in

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Speaker 4: some of those immigrant groups coming in our apartment buyers

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Speaker 4: and so couldn't have an impact there. I guess the

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Speaker 4: other issue is the extent to which the government might

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Speaker 4: move to do something to address that and opening up

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Speaker 4: immigration policy further potentially if they start to hear more

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Speaker 4: calls about shortages from various businesses. I've also heard the

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Speaker 4: Prime Minister recently talking about possibility of bringing back international

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Speaker 4: investors into residential property. That was a National Party policy

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Speaker 4: that didn't get through the coalition agreement because Whinston Peter's

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Speaker 4: in New Zealand a first are very much against that.

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Speaker 4: But apparently according to the Prime Minister, he's softening a

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Speaker 4: bit on the idea that if we have other investment

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Speaker 4: criteria tied to residential housing, they might be able to

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Speaker 4: get some agreement on allowing some international investment and residential housing. So,

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Speaker 4: you know, the Prime Minister has taught a lot about

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Speaker 4: getting more money into the country and that if it's

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Speaker 4: not people themselves moving here, if the money's coming here,

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Speaker 4: that sort of fills the app So that's sort of

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Speaker 4: something that the government of its successful in doing that,

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Speaker 4: could do to counter this, and then I guess that

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Speaker 4: gets the ball rolling, you know, you get the economy

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Speaker 4: rolling again, and then migration would probably pick up.

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Speaker 1: What do you think about this idea of bringing back

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Speaker 1: foreign investors to increase immigration.

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Speaker 2: I think it's a pretty marginal effect really. I guess

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Speaker 2: the foreign investment in housing in particular, we kind of

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Speaker 2: saw how it worked when it was implemented that probably

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Speaker 2: didn't really make a big dent in you know, what

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Speaker 2: was a pretty otherwise hot housing market at the time,

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Speaker 2: and I think that there's probably a few chains that

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Speaker 2: you have to go through for that to sort of

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Speaker 2: rarely benefit the economy. So it's one thing to sort

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Speaker 2: of bring foreign investor money in, but you need to

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Speaker 2: know probably actually make it easy for them to do

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Speaker 2: something with that. So that's probably still coming down to

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Speaker 2: that nagging issue about the ease of building housing. The

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Speaker 2: funding is not the constraint here. It's how easy we

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Speaker 2: ourselves choose to make it for anyone, whether they're New

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Speaker 2: Zealanders or foreigners.

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Speaker 1: Michael and Liam, thank you. That's it for this episode

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Speaker 1: of the Front Page. You can read more about today's

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Speaker 1: stories and extensive news coverage at inz Herald dot co

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Speaker 1: dot endzet. The Front Page is produced by Ethan Sills.

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Speaker 1: Patty Fox is a sound engineer. I'm Susan Nordquist. Subscribe

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