Economy proves a magnet

New Zealand's so-called ''rock star economy'' continues to attract Kiwis back home and people from other countries to relocate in the hope of better prospects.

Paul Bloxham, the man who dubbed New Zealand the ''rock star economy'' continues to rate the economy highly.

Mr Bloxham, HSBC's chief economist for Australia and New Zealand, said the local economy was still powering ahead and was likely to outstrip other countries in the OECD.

Last week, Statistics New Zealand said New Zealand's economy grew 3.8% in the year ended March and followed that up yesterday with figures showing the country's net migration was at a 10-year high.

The showed 99,900 migrants arrived in May, up 14% from the May 2013 year when 87,800 people arrived.

Migrant departures numbered 63,500, down 22% from the previous corresponding year's 81,500.

This resulted in a net gain of 36,400 migrants in the May 2014 year, compared with a net gain of 6200 in the previous corresponding year.

The last time net migration was higher than the latest figure was in November 2003, with 36,700. New Zealand recorded its highest net gain of 42,500 migration in the May 2003 year.

Over the last 20 years, New Zealand's annual net inflow of migrants has averaged 11,700.

Statistics NZ populations statistics project manager Susan Hollows said in the latest year, New Zealand had a net loss of 9700 migrants to Australia, well down from 32,900 a year earlier.

Net gains were recorded from most other countries, led by India with 6600, China with 6300 and the United Kingdom with 5700.

Within New Zealand, 12 out of 16 regions had a net gain of international migrants.

As expected, Auckland had the largest gain, of 17,000, followed by Christchurch with 5400.

Unexpectedly, Otago had a net gain of 900, ahead of Wellington on 800.

On a monthly basis, New Zealand's seasonally-adjusted net migration inflow eased slightly in May, down from the 4090 recorded in April.

The May total was still the third-highest on record, which ASB economist Daniel Smith said was not evidence the peak in monthly flows had passed.

''Compared to the previous month, both arrivals and departures were higher. Arrivals lifted by 4% while departures rose by 10%.''

The increase in monthly departures was driven by a higher outflow to Australia. Those numbers lifted by nearly 12% month-on-month.

The number of New Zealanders leaving for Australia remained at very low levels, he said.

The strong net migration inflows were largely driven by a continued fall in New Zealand's net migration deficit with Australia.

''Strong migration is providing a ready supply of workers and keeping New Zealand market strains low. But strong population growth will also create additional housing market pressures and drive strong domestic demand and inflationary pressures.''

The Reserve Bank had made no secret it was wary of the inflation pressures additional migration would most likely give rise to, Mr Smith said.

As the Australian labour market improved gradually throughout the rest of the year, New Zealand's net migration inflow was expected to slow but was still likely to peak at 40,000 annually.

Should the expected slowdown in migration not start in coming months, the potential was clearly there for a higher interest rate outlook - something both the Reserve Bank and the Treasury had warned of recently.

''Assuming we are near the peak in the migration cycle, we continue to expect the official cash rate will rise by a further 0.25% in July and December this year with another 0.75% of hikes over 2015 to take the OCR to a peak of 4.5%,'' Mr Smith said.

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