Key Facts:


– Record migration in New Zealand is putting pressure on mortgage rates, especially in Auckland.
– The national median residential rent has increased by $40 a week, or 7.4%, over the past year.
– Higher rents directly contribute to inflation, affecting the non-tradable inflation component that the Reserve Bank of New Zealand (RBNZ) focuses on.
– Auckland rents have increased by 12% since last year, with a median weekly rent of $670.
– High migration not only impacts rents but also results in higher demand and potential price increases for consumer goods.
– The extent to which migration affects prices and inflation is difficult to estimate precisely but is considered an upside risk.
– Major banks expect inflation and interest rates to remain high next year, with the RBNZ potentially not cutting the official cash rate until 2025.

Article Summary:


The record migration in New Zealand is leading to increased pressure on mortgage rates, specifically in Auckland. Over the past year, the national median residential rent has risen by $40 a week, contributing to inflation. Auckland rents have experienced a significant increase of 12%, putting strain on the market as listings decrease while enquiries rise.

The influx of migrants not only impacts rents but also drives higher demand for consumer goods, potentially leading to price increases. The effect of migration on prices and inflation remains uncertain, but it is considered an upside risk. Major banks anticipate high inflation and interest rates in the coming year, with the RBNZ potentially delaying rate cuts until 2025.

While the surge in migration could have some positive effects, such as boosting GDP and reducing inflation pressure through increased labor supply, its overall impact on inflation remains uncertain. The RBNZ has outlined four factors it considers when assessing the potential effects of migration on inflation: country of origin, age, occupation, and arrivals and departures. The bank’s forecasts assume that labor supply and housing demand will balance out, resulting in a small net positive inflation impact. However, the risks are seen as tilted towards a larger inflation impact than initially expected.

Source Link: To read the full article, click here.