New Zealand is proving surprisingly popular to immigrants, so much so that policymakers keep rewriting their economic forecasts.
A record influx of migrants in the past two years has seen more people seeking work, reducing pressure for wage rises and helping to keep inflation well below the central bank's target. This encouraged the Reserve Bank of New Zealand (RBNZ) to reverse policy in 2015, cutting interest rates four times in six months and saying further easing is possible in 2016.
"Everybody has continued to be surprised at how strong immigration has remained," said Craig Ebert, senior economist at Bank of New Zealand in Wellington. "Every month you think surely this is the month when it starts to cool off, and it just doesn't. Where it goes will be really important for the economic story in the next year or two."
New Zealand remains attractive to migrants for its political stability, lifestyle and relatively strong economy. More Kiwis are also staying home rather than emigrating across the ditch where the end of the Australian mining boom has meant fewer high-paying jobs for Aussies and foreigners alike.
New Zealand's population grew 2 per cent to 4.6 million in the year ended September 30, the fastest pace in more than two decades.
By contrast, Australia's population growth slowed to 1.4 per cent in fiscal 2015 as the economy weakened, making it less attractive to migrants. About 21,300 New Zealand citizens departed for Australia in the year ended November 30, less than half the 48,600 who made the trip in 2012, government figures show.
Foreign student arrivals to New Zealand have surged 82 per cent in the past two years as institutions attract young Indians and Chinese, while the number arriving on work visas has increased 25 per cent since 2013 amid increased demand in the construction and software development industries.
The RBNZ last month estimated net arrivals of working-age migrants surged to a record 55,400 in 2015 - 32 per cent higher than its projection just 12 months earlier and 3 1/2 times its 2013 forecast.
Treasury and bank economists have also been wrong-footed by the strength of the inflow, which has coincided with falling oil prices and slower economic growth to drive inflation as low as 0.3 per cent. The Reserve Bank aims for 2 per cent.
Last month, RBNZ governor Graeme Wheeler, who has now unwound all of his 2014 rate tightening, said the central bank had been surprised by the scale of immigration. While the boost in population has stoked consumption and housing demand, it has been the supply side impact on the labor market that has affected the economy more quickly, giving it the capacity to absorb growth without pushing up prices, he said.
Wheeler expects 120,000 more immigrants in the three years through December 2018.