‘Economic refugees’ flee New Zealand as cost of living crisis deepens

Once recognised around the world as a picturesque and progressive haven, New Zealand’s fragile economy has driven many of its citizens out of the country.

Amid high prices, high interest rates and high unemployment, the government recently estimated that 131,200 people had fled the country in the 12 months through June, a record. Of those, about 80,200 were citizens, nearly 70% more than in the year ending June 2019, before the pandemic.

Wilson Ong, 32, who works as a manager and buyer in the fashion retail industry in New Zealand, has seen many of his friends leave and is considering joining them.

“For me, the key factor is the quality of jobs,” he said. “In New Zealand, you feel limited in terms of job opportunities and work experience.”

It has long been common for New Zealanders, also known as Kiwis, to seek out overseas experiences, with strict Covid-19 lockdowns delaying many travel plans.

However, Ong also represents growing discontent among New Zealand millennials and Generation Z over the deteriorating economy, according to one economist.

According to government statistics, more than 50% of New Zealand emigrants in the year ending June 2024 were people aged 20 to 39, with those aged 25 to 29 making up the largest group.

“Over the past year and a half, the New Zealand economy has slowed and job losses have begun, particularly for younger generations,” said Shamubeel Eaqub, senior economist at the New Zealand Institute of Economic Research.

“Until the job market improves, I don’t expect these economic refugees to stop leaving New Zealand,” he said.

Cost of living crisis

At the start of the pandemic, the New Zealand government implemented strict lockdown measures and mandatory 14-day isolation for people arriving in the country, in an effort to eliminate Covid.

Before managed isolation was imposed, then Prime Minister Jacinda Ardern said nearly 40,000 New Zealanders had returned home between 20 May 2020 and 9 April 2020 – more than all the available hotel rooms in the entire country.

New Zealand was subsequently praised for its rapid response to the pandemic, which suppressed the virus for long periods, resulting in low death rates.

Ong had postponed his plans to move to England in 2020 and decided to stay in New Zealand, which he considered a safer place to wait out the pandemic. He became a beneficiary of the Covid-era wage subsidy and was later able to return to his old job in the country’s largest city, Auckland.

But those subsidies have since dried up, and many small businesses that closed during pandemic lockdowns never reopened. At the same time, persistently high inflation has squeezed the purchasing power of the country’s roughly 5 million consumers.

In the June 2022 quarter, New Zealand’s annual inflation rate reached 7.3%, its highest level in more than three decades. Although it has since fallen to 3.3% in the June 2024 quarter, it remains above the Reserve Bank of New Zealand’s medium-term target range of 1% to 3%.

Housing affordability in the country (rent and mortgages compared to salary) remained high, with housing affordability remaining below long-term averages, according to CoreLogic data.

Meanwhile, as the country’s economy teeters between recession and recession, Ong said wages in his sector have stagnated, making him feel economically worse off than before the pandemic.

“I think one characteristic of a bad economy is the lack of opportunities to increase your wages relative to the cost of living,” said Ong, who is currently looking for work in several countries.

The share of income needed for mortgage payments has hovered between 53% and 57% over the past three years, Kelvin Davidson, chief property economist at CoreLogic NZ, said in August.

To put this in perspective, “mortgage payments were only 50% or more of income for six quarters” in 2007-2008, during the global financial crisis.

Low wages

Data shows that neighbouring Australia is the most common destination for New Zealand emigrants.

Not only is the economy better in the neighboring country, but the Australian government is making it easier for New Zealanders to move in with a special visa. Since July 2023, New Zealand citizens who have lived in Australia for at least four years can apply directly for citizenship.

The Australian government has also sought to recruit New Zealand workers into the public sector. In recent months, Australia has funded full-page advertisements in the New Zealand Herald promising “warmer days and higher wages” for New Zealand police officers, according to local media.

A recent salary guide for New Zealand and Australia, compiled by recruitment firm Hays, found that roles across a wide range of sectors were significantly better paid in Australia.

For example, according to Hays data, a site foreman, a worker responsible for a team, could earn more than 60% more in Sydney than in Auckland.

Worse before it gets better

Despite growing concerns about brain drain and the loss of skilled workers, there is little New Zealand can do in the short term to improve its economic conditions, according to Eaqub.

“I think (the economy) is going to get worse before it gets better,” he said, partly blaming a number of New Zealand’s post-Covid policy measures, such as high interest rates, which have restricted consumer and business spending.