Inside Economics: Big rate call today, plus brain drain stats reveal alarming exodus of older workers

Economists and markets have a 50 basis point cut locked in as a near certainty. That will take the official cash rate from 4.25% to 3.75%.

But whether it will fall much further from here isn’t so clear. Economists are divided with some picking it may go as low as 2.5% and others thinking the RBNZ will call time after one more cut – at 3.5%.

Today’s release includes a full Monetary Policy Statement with new forecasts and commentary about the state of the economy and world.

We’ll also see Reserve Bank Governor Adrian Orr front up for a press conference at 3pm.

To read the full preview click here.

What’s worse than losing record numbers of 25-year-olds? Losing record numbers of 35-year-olds!

Over the past year, we’ve seen record numbers of Kiwis leave the country long-term.

On Monday Stats NZ released numbers that showed a 72,000 loss of citizens – the largest ever for a calendar year.

The last few months show the trend is stabilising so we hopefully won’t break this record in 2025.

But the levels of departure remain worryingly high and a new breakdown of the numbers by age does nothing to ease concerns.

Stats NZ has highlighted that 38% of the departing Kiwis were aged between 18-30.

The peak age for departures was 25.

But it’s not the loss of 20-somethings that bothers me. This is the age at which Kiwis have always headed out for international adventure.

In fact, the data shows that it is for those aged 25 to 46 that we saw record levels of migration in 2024.

It is this trend that should really concern us.

A deep dive reveals that while the number of migrant departures for 25-year-olds is at a record level, the variance with previous years is not that great.

There was a total 4628 migrant departures by 25-year-olds in 2024.

But we saw more than 4000 25-year-olds leave in 2010, 2011, 2012, 2017 and 2018.

Meanwhile, in 2024 departures of those aged 21, 22, 23 and 24 were actually below levels we’ve experienced in the recent (pre-Covid) past.

In other words, we’re kind of used to Kiwis heading off into the world in their early 20s.

Older workers leaving

What was more shocking to me was that for those in their late 20s, 30s and 40s, the annual numbers of departures were much higher than the historical precedent.

In fact, the total number of migrant departures by age runs at record levels right through to 46.

So the numbers are higher for younger Kiwi departures, but they always are.

What’s unusual about the last year is the increase in older people choosing to move their lives offshore.

I should note here that I’m relying on the total numbers for long-term departures.

As well as New Zealand citizens, it will include long-term New Zealand residents.

It will reflect an increase in the departure of relatively new immigrants as well as citizens.

But the trend is clear and the result for the economy is that we are losing people who are in the prime of their lives and should be more settled.

Those aged 25 to 46 are far less likely to be leaving the country for a couple of adventurous years of OE.

They are leaving for better career prospects.

Losing those aged 25-46 is also more worrying from a Crown revenue perspective.

They earn more and pay more taxes.

New Zealand still maintains a nominal net migration gain – 27,100 in 2024.

But that is down from a net gain of 128,300 in 2023, and it is dwindling.

Economists don’t think we’ll hit net zero and there is some optimism that the outbound trend is stabilising.

Let’s hope so because we can’t afford to keep losing the skills and productive power of workers aged between 25 and 46.

Tourism rebounding – but is it inbounding our outbounding?

Tourism revenue has been one of the missing pieces of the puzzle in New Zealand’s post-Covid economic recovery (or lack of it).

The rebound to pre-Covid levels has been slower than hoped. We’re still about 11% down on the visitor numbers we had in 2019 and that doesn’t include six years of potential growth that has been lost.

In the past few weeks, the Government has launched new initiatives to try to boost the recovery.

But reader James Dawson raises an interesting point about the net value of tourism.

“Much is made of the positive economic role that inbound tourism has on the NZ economy, representing the positive inflow of funds injected into the economy – or to look at it another way, an export of ‘the New Zealand experience’ to the world.

“But there never seems to be much discussion about the negative economic role that outbound tourism has – representing the negative outflow of funds as Kiwis go overseas on holiday – or to look at it another way, an import of ‘the world experience’ to NZ.”

James asks: “Is there any meaningful data on a tourism ‘balance of payments’ to understand whether NZ gains overall or loses overall financially from international tourism if considering it from both directions?”

The short answer is yes. As well as recording the number of short-term overseas visitors, Stats NZ records the number of New Zealand resident arrivals from overseas (ie people coming home from short trips).

These numbers show that the balance of payments around tourism is positive – we are primarily an exporter of the New Zealand experience.

But not by as much as you might think.

Overseas visitor arrivals were 3.31 million in the December 2024 year, an increase of 357,000 from the December 2023 year.

Meanwhile, New Zealand-resident traveller arrivals were 2.99 million in the December 2024 year, an increase of 310,000 from the December 2023 year.

To be fair, those numbers for Kiwis travelling will include a lot of business travel and people crossing the border multiple times during the year.

That kind of travel and international connection adds value to the New Zealand economy.

We also don’t know how much Kiwi travellers are spending overseas relative to tourists visiting us (which we do have numbers on).

Lopsided recovery

Infometrics economist Brad Olsen notes that the recovery has been lopsided.

“The 3.3 million tourist arrivals in 2024 took us to 85% of pre-pandemic levels, up from the 76% recovery seen over the 2023 year,” he says.

“However, departures of Kiwi tourists overseas have been stronger, with annual Kiwi tourist departures at 98% of pre-pandemic levels over 2024,” he said.

Looking at the monthly trend shows the number of arrivals is improving and rose 12% in December, with nearly 470,000 visitors.

“This result was 89% of December 2019 (pre-pandemic levels) – the strongest monthly recovery since May, and well ahead of the 79% recovery rate seen in December 2023,” Olsen said.

To cut it another way, there were 1.32 million border crossings in December 2024, made up of 668,600 arrivals and 655,800 departures. In December 2023 there were 1.21 million border crossings.

December 2024 border crossings were 92% of the 1.45 million in December 2019, before the Covid-19 pandemic.

Overall I’d say we can’t worry too much about the outbound side of the revenue equation.

We need to maximise the value of inbound regardless.

Don’t leave town till you’ve seen the country

James wonders whether we might look at a campaign to encourage more local tourism.

“Just as the ‘Buy NZ made’ campaign encourages us to support local manufacturing, should Kiwis be getting more encouragement to holiday at home and keep their holiday funds circulating within the NZ economy rather than sending them offshore?”

Well maybe? Tourism NZ has run domestically focused campaigns in the past. Most recently during Covid – when we couldn’t really go anywhere else.

But I’m old enough to remember the classic government Tourist Board campaign for 1984.

Don’t leave town till you’ve seen the country.

Economy into growth territory – just

How will we know when we are out of recession? GDP stats are famously slow to arrive. We’ll get an update on the December quarter on March 20.

One of the places economists look for an up-to-date gauge is a survey that asks businesses to assess their performance.

Called a Purchasing Managers Index, the survey polls the buyers at the coalface in two key sectors – manufacturing and services.

These surveys are a big deal in large markets like China and the US, where their release often moves markets.

In New Zealand, the results often fly under the radar but are produced each month via a partnership of Business NZ and BNZ.

The good news is that last month both manufacturing and services sectors were in growth territory – just.

The seasonally adjusted Performance of Manufacturing Index for January was 51.4 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining).

That was the first expansion in 23 months and was up from 46.2 in December. It was the highest level of expansion since September 2022. However, the January result is still below the average of 52.5 since the survey began.

The Performance of Services Index for January was 50.4. This was up 2.3 points from December but still well below the average of 53.1 over the history of the survey.

BNZ’s senior economist, Doug Steel, said that “the PSI is consistent with stabilisation rather than elevation, but its latest move upwards is encouraging”.

He was more upbeat about manufacturing, describing the sector as “shifting out of reverse and into first gear”.

Here’s hoping the results really do signal an end to the recession and the start of a real recovery.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up to my weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here. If you have a burning question about the quirks or intricacies of economics send it to liam.dann@nzherald.co.nz or leave a message in the comments section.