An independent economist says the Government's refusal to tweak immigration rules is a "mistake" that could make inflation worse.
It comes as staff shortages are hitting nearly every industry including healthcare, agriculture, teaching and hospitality.
Many businesses are crying out for the Government to loosen the country's immigration settings to encourage more overseas workers to move here and fill the gaps.
But speaking with AM on Monday Prime Minister Jacinda Ardern said the Government has worked very hard to ease the pressure on businesses.
One of the main calls is for the Government to tweak the settings to allow nurses to apply for residency in the same time frame as doctors.
Earlier in the year, the Government announced a new Green List for skilled immigrants. The fast-tracked residency pathway means those in certain skilled occupations could come to the country on a work visa from July 4 and apply for residency from September.
A Work to Residency Pathway allows other occupations to apply for residency but only after working in the country for two years first.
Occupations on the fast-tracked list include GPs, surgeons, engineers and several construction roles. The second pathway includes nurses, midwives and teachers.
Ardern defended the decision not to allow nurses to apply for residency in the same time frame as doctors, suggesting if they weren't willing to stay in the job for two years, "perhaps they don't want to be a nurse in New Zealand".
The Prime Minister was also asked about relaxing rules around the Working Holiday Visa applications to encourage more people to apply.
Hospitality and tourism businesses have called on the Government to open Working Holiday Visas to all eligible countries immediately, cut the cost of applications and increase the age limit from 30 to 35.
The Prime Minister defended all the current settings saying the visas were already open to many countries and thousands of people were utilising the system. She also said the costs weren't prohibitive relative to other countries and the age limits are based on what the countries will offer Kiwis back.
But speaking with AM on Tuesday independent economist Cameron Bagrie said the Prime Minister's refusal to tweak the settings is a "mistake".
"It's a mistake, to be brutally honest," Bagrie told AM. "It's a really simple equation at the moment in regard to getting inflation down. Some inflation is beyond our control, we don't control international oil prices so we're sort of beholden to what's happening globally. But if you look at what's called domestic inflation...That's a basic mismatch between demand versus supply and at the moment, we've got too much demand relative to supply.
"The big problem is insufficient supply, so here's a simple equation, we either get supply up or we get demand out. It's a pretty easy choice in regard to what we want to be doing in regard to what's more economically friendly for society out there," he said.
Bagrie said while the Government kept the country safe in the midst of the COVID-19 pandemic, they failed to properly future proof and now the country is suffering.
"We forgot about the longer term and we focussed on the short game and now what we're seeing is the rest of the globe is reconnecting.
"If you talk to businesses that travel overseas at the moment, we're a long way behind the eight ball. You look at our hospitalisation numbers at the moment, our COVID numbers here, we're starting to spike…we don't have the hospital capacity like other countries around the globe."
Bagrie said making ourselves as attractive as possible to overseas workers could be a key part of getting inflation down.
"Countries that are going to have the worst inflation problems are going to be countries that are spending the most, countries that have central banks that are a little bit more relaxed about lifting interest rates...
"But also countries that have what's called slower potential growth, what's the anaerobic capacity of your economy to grow? How dynamic, how productive is your economy? What's your availability of workers?"
Bagrie said businesses are already struggling for staff and thousands of Kiwis are expected to leave the country and not come back in the coming months.
"What we are seeing at the moment is New Zealand's migration numbers in regard to New Zealanders, they still say we have a slight New Zealand inflow but if you hear anecdotally on the ground it looks like, 'The last one out turns off the lights'.
"I suspect those numbers massively underestimate what the proper numbers are going to be in 12 months because we don't know. At the moment a lot of people just seem to be leaving in the short term - they're going on holiday. I suspect in 12 months they're not going to be coming back."
Bagrie's predictions are backed up by a recent survey that found more than one million Kiwis are actively considering leaving New Zealand as the brain drain takes full force.
The latest Consumer Snapshot from business management platform MYOB, a nationwide poll of more than 500 people, shows four percent of those polled - equivalent to around 200,000 New Zealanders - have decided they are moving overseas to live and work now the borders have reopened. And an additional 20 percent of those surveyed, equivalent to approximately 1,025,000 people based on population data, said they are actively considering moving offshore.
This is a drastic rise in pre-pandemic trends with just less than 41,000 Kiwis leaving New Zealand to go overseas for at least 12 months in 2019.
