The Immigration Tap: How National turned a housing crisis into a growth strategy

“We don’t have a real economy, we have a housing market with bits tacked on.” - Bernard Hickey

For nearly a decade, National governments have run the same cynical playbook: when the economy falters, turn on the immigration tap. Flood the country with workers to create instant demand for housing and construction, watch house prices soar, point to GDP growth, and call it success. It’s economic fraud masquerading as policy.

This isn’t migration policy designed to build New Zealand’s future. It’s a Ponzi scheme that requires ever-increasing numbers of arrivals to sustain inflated property values and construction activity. The scheme inflates GDP figures while hollowing out living standards, pricing young New Zealanders out of home ownership, and straining infrastructure to breaking point. Worst of all, it’s now exporting our skilled workers while importing their replacements from developing nations who require significant investment just to reach baseline competence.

John Key pioneered this approach after the 2008 Global Financial Crisis. Rather than learn from a mortgage bubble that devastated the global economy—the same bubble his former employer Merrill Lynch lost over $21 billion fuelling—Key weaponized housing inflation as New Zealand’s primary growth engine.

Helen Clark’s Labour government had left the country in excellent fiscal shape. Government debt had been paid down, and the Cullen Superannuation Fund established to ensure long-term sustainability. New Zealand entered the GFC with debt at just 16.6% of GDP—one of the lowest rates in the developed world.

But Key’s National government abandoned this prudence. By 2017, when he left office, government debt had ballooned. The response to the Christchurch and Kaikoura earthquakes—while necessary—became an exercise in wasteful infrastructure spending. The total insured cost of the Canterbury earthquakes exceeded $31 billion, with total economic losses estimated at over $40 billion. The government committed billions more to infrastructure projects, including over $1.1 billion to rebuild State Highway 1 around Kaikoura alone.

The influx of insurance money and demand for reconstruction workers triggered something more insidious: a deliberate immigration surge. Annual net migration, which had averaged around 15,000 for the previous 25 years, skyrocketed to approximately 70,000 by 2017. This wasn’t accidental policy drift—it was National’s central economic strategy.

The mechanism was simple but destructive. Mass immigration created instant demand for housing and construction, which National politicians could point to as “economic growth.” But this wasn’t productive growth—it was a Ponzi scheme that required ever more immigrants to sustain inflated demand.

Worse, the scheme was turbocharged by a perverse quirk in monetary policy: house prices weren’t included in the Consumer Price Index that the Reserve Bank used to set interest rates. This created a vicious feedback loop. Rising house prices absorbed household budgets, reducing spending on CPI-measured goods like food, clothing, and electronics. Lower CPI inflation meant lower interest rates. Lower interest rates fuelled more mortgage demand. More mortgage demand pushed house prices higher. Higher house prices squeezed household budgets further, keeping CPI inflation low, maintaining low interest rates—and the cycle continued.

The very factor driving inflation in the cost of living was invisible to the inflation targeting regime. Interest rates stayed low precisely because housing was becoming unaffordable, creating a monetary policy trap that rewarded speculation and punished savers.

The Illusion of Growth

Behind National’s boasts about “economic growth” lies a devastating reality. Between 2008 and 2017, median household income rose 35%—from $59,920 to $81,059. Impressive, until you account for inflation of approximately 17% over the same period. Real income growth was roughly 15% over nine years—barely 1.6% annually. Meanwhile, Auckland house prices surged from 6.4 times median income to 10 times. House prices grew nearly three times faster than incomes.

This wasn’t growth. It was a wealth transfer from earners to asset holders.

The housing cost burden tells the story more starkly. In Auckland, housing costs consumed 16.8% of household income in 2007, rising to 19.9% by 2016. These figures actually understate the burden because they include households that own homes outright. For families paying mortgages or rent, the squeeze was far more severe. With inflation-adjusted incomes crawling upward at 1.6% per year while housing costs exploded, household expenditure on everything else—food, transport, education, healthcare—was being systematically compressed.

New Zealanders were getting poorer in real terms, even as GDP figures claimed the opposite. The “growth” National celebrated was largely fictional—GDP inflated by population increases while GDP per capita stagnated and household purchasing power declined.

The building sector became a self-feeding monster. As skilled and unskilled labour flooded in to meet construction demands, the cost of building materials and labour ballooned. The International Monetary Fund ranked New Zealand at the top for housing unaffordability in the OECD.

But the contagion didn’t stop at urban boundaries. The “new build” industry metastasized like a virus across the countryside, consuming productive farmland in an ever-expanding sprawl. Prime agricultural land that once produced food and export earnings was subdivided into quarter-acre suburban dreams, pushing urban boundaries outward in a low-density sprawl that maximized infrastructure costs and land consumption.

This destruction of the productive land base had direct economic consequences. As farmland was converted to housing, the cost of remaining agricultural land increased, driving up food prices and squeezing the primary industries that actually generate export income. The building sector was literally eating the economy that sustained it, converting productive assets into speculative property holdings.

Economist Shamubeel Eaqub, speaking at the release of a government housing report in 2018, captured the absurdity perfectly, politely censoring himself in the presence of the Minister:

“The state of the housing market is a cluster... You fill in the gaps,”

Business journalist Bernard Hickey went further, articulating what many economists recognized but few dared say so bluntly:

“We don’t have a real economy, we have a housing market with bits tacked on.”

That wasn’t hyperbole—it was diagnosis. The “bits tacked on”—dairy, tourism, technology—existed to service a property speculation machine that had consumed the nation’s economic imagination.

This wasn’t economic diversification—it was economic monoculture with a property title.

Meanwhile, National’s refusal to implement a capital gains tax turned property into the nation’s most attractive speculative investment. Foreign investors and domestic speculators created thousands of “ghost houses”—over 33,000 unoccupied properties in Auckland alone by 2016. The lack of taxation on capital gains, combined with negative gearing allowances, made it more profitable to leave homes empty and watch their value appreciate than to rent them out.

Rental supply shortages intensified, rents ballooned, and ordinary New Zealanders were priced out of both home ownership and affordable rental accommodation. Capital valuations increased, council revenues swelled, and local authorities wasted the windfall on pet projects rather than addressing the fundamental infrastructure deficits that immigration-driven population growth demanded.

The Reserve Bank and numerous international experts warned repeatedly about this unsustainable model. The IMF called for taxation of property speculation and comprehensive capital gains taxes to redirect investment toward productive assets. They cautioned that the housing bubble posed systemic risks to financial stability. These warnings were ignored.

The “build our way out” mantra became National’s only response, championed by figures like James Meager. But this ignored a fundamental truth: you cannot build your way out of a crisis when immigration is being used as a tap to artificially inflate demand. Every new build simply justified more immigration to maintain construction activity, which created demand for more builds, requiring more immigrants. The cycle was vicious and deliberate.

The social costs have been devastating. New Zealand now has one of the highest homelessness rates in the OECD. Home ownership dropped from 74% in 1986 to 65% by 2013. Overcrowding became rampant, particularly among Māori and Pasifika communities. The waiting list for public housing doubled between 2017 and 2019, reaching a record 12,500.

As economist and Herald business editor Liam Dann has repeatedly observed, New Zealand’s economy has become dangerously over-reliant on property. In his extensive analysis of the housing market, Dann has documented how property dominates investment decisions, crowds out productive enterprise, and creates a “wealth illusion” where paper gains in house values substitute for genuine economic growth. The economy became trapped in a cycle where property market confidence was treated as essential to growth—a fundamentally unstable foundation.

Economist Shamubeel Eaqub went further, coining the term “Generation Rent” to describe how housing unaffordability was creating a new class system. In his analysis, New Zealand was developing a “modern day landed gentry” where house owners sat at the apex of a society increasingly divided by property ownership. This was, as he put it:

“a serious and persistent attack on New Zealand’s identity as an egalitarian society.”

Network infrastructure—water, transport, health, education—groaned under the strain. Councils lacked the capacity to provide essential services for rapidly growing populations. The “growth” National celebrated masked a fundamental hollowing out of New Zealand’s economic base and social fabric.

This is not to argue against immigration per se. New Zealand has always been enriched by newcomers. But immigration should serve the nation’s long-term interests, not be cynically manipulated as a tap to control short-term GDP figures while creating unsustainable housing inflation and infrastructure deficits.

Let’s be clear about what immigration policy should actually be: discrimination in the service of national interest. We should be selecting people who will contribute positively to New Zealand’s economic and social fabric—not simply bodies to fill construction jobs and rental properties. Immigration policy must consider whether newcomers will integrate successfully with our social and network infrastructure, not concentrate exclusively in Auckland, require extensive remedial education, or place immediate strain on our already-stretched health system.

Yet the post-2023 election data reveals the opposite is occurring. While a record 131,200 people left New Zealand in the year to June 2024—with 80,200 being citizens—the composition of arrivals has shifted dramatically. India, the Philippines and China are now the top three source countries, with India registering the strongest increase of 33,000 arrivals compared to previous years.

Meanwhile, 56,500 New Zealand citizens left in the year to April 2024—a record exodus—and these aren’t just ordinary emigrants. As sociologist Paul Spoonley observed, New Zealand’s diaspora has “a very high proportion of people who are tertiary qualified and skilled”. Nearly 40 percent of those leaving are aged between 18 and 30—precisely the skilled workers New Zealand needs to retain.

This is a double catastrophe: we’re losing our best and brightest while importing workers from developing nations who often require significant investment in language training, credential recognition, and social integration. The immigration tap isn’t just being turned on indiscriminately—it’s actively selecting for the wrong outcomes while our own educated youth flee to Australia, where starting salaries and $25,000 relocation packages make the choice obvious.

The Fraud Nobody Monitors

The stampede to fill jobs with migrants revealed another ugly truth: nobody was actually checking whether the system was being abused. Mass immigration without oversight became an open invitation to exploitation and fraud.

Burger King was banned from hiring migrant workers for a year after a former employee’s extra hours pushed their pay below minimum wage. The fast-food giant, owned by New York private equity firm Blackstone Group, was caught operating a system where vulnerable migrants worked unpaid overtime, their visa status tying them to exploitative employers.

But Burger King was just the beginning. The liquor store industry became a particular horror show. Sukhdev Singh, who controlled four Liquor Centre stores, was fined a record $1.55 million after confiscating workers’ bank cards, forcing them to work 70-hour weeks, and making them sleep in a cubicle at one of his shops. Labour Inspectorate head Stu Lumsden called it what it was: “modern-day slavery.”

The Labour Inspectorate estimated about 40% of all bottle stores were breaking labour laws. Franchises like Super Liquor, Bottle-O, and Liquor Centre were forced to terminate relationships with exploitative franchisees as case after case emerged of migrants paid as little as $7 an hour, working 90-hour weeks, denied sick leave and holiday pay.

The pattern was consistent: Indian and Pacific Islander workers treated like indentured servants, their immigration status weaponized to ensure compliance. Employers knew the threat of deportation kept workers silent about wage theft, dangerous conditions, and systematic abuse.

Then there was the investor visa scam. Two-thirds of all investor visa applicants were from China, with a 53% rejection rate—among the highest for any golden visa program globally. The requirement for direct bank-to-bank transfers from the country where funds were earned was designed to prevent money laundering, but it highlighted a broader problem: the system was riddled with fraudulent applications.

Most recently, NZTA cancelled 459 truck licences after discovering fraudulent conversions—all 459 drivers were born in India, with 436 having converted licences from the UAE using false or altered documentation. Hundreds of families protested at a South Auckland gurdwara, many claiming they’d been scammed by Dubai-based providers selling fraudulent supporting letters for a fee.

And here’s where the absurdity reaches its peak: while the system enabled exploitation and fraud on an industrial scale, highly qualified professionals were being shut out. Foreign-trained doctors from India and other countries were working in call centres and driving Ubers because they couldn’t get the hospital internships needed to register in New Zealand, even as the health system faced desperate shortages.

Prime Minister Christopher Luxon claimed there were 100 overseas-trained doctors driving Ubers who wanted to work as GPs, but when pressed for evidence, his office could only confirm that “some” doctors were driving taxis. Meanwhile, one anaesthetist with 12 years of medical experience in India, including two as a consultant specialist, was stuck working as a healthcare assistant.

The irony is savage: we imported workers for liquor stores and fast-food outlets while keeping trained doctors in Ubers. We rubber-stamped truck driver conversions that turned out to be fraudulent while rejecting skilled medical professionals. We celebrated “growth” driven by an immigration system so broken that exploitation was the business model and fraud was endemic.

This wasn’t immigration policy serving national interests—it was a lawless free-for-all where the only winners were exploitative employers and visa scammers, and the losers were both migrant workers trapped in modern slavery and New Zealanders watching their wages suppressed and working conditions deteriorate.

National’s playbook has failed spectacularly. Using mass immigration as GDP wallpaper doesn’t create genuine prosperity—it creates housing inflation, infrastructure collapse, and a society where the next generation cannot afford to live in the country they were born in.

Real economic growth requires productivity gains, innovation in high-value sectors, and sustainable investment in people and infrastructure. It requires tax reform—including the capital gains tax that the IMF and every credible economist has recommended for years—to redirect investment away from property speculation and toward productive enterprise.

Instead, National chose the easy option: turn on the immigration tap, watch house prices inflate, call it growth, and leave the bill for someone else to pay. We’re now paying that bill with record emigration of skilled workers, crumbling infrastructure, and a building sector addicted to perpetual population growth just to stay solvent.

The irony is cruel: National imported the failed playbook of the Global Financial Crisis to solve the Global Financial Crisis. Fifteen years later, we have the unaffordable housing, the government debt, the infrastructure deficits, and the social strain—but without the growth that was promised.

Young New Zealanders are voting with their feet. They’re leaving for countries where hard work can actually buy a house, where infrastructure keeps pace with population, and where immigration policy serves the nation’s interests rather than the property portfolios of sitting MPs.

Until we stop treating immigration as an economic tap to be cynically manipulated for short-term GDP optics, we’ll keep exporting our future while importing our problems. That’s National’s legacy: a country that grows its population but shrinks its prospects.