New Zealand has an economics-based immigration programme; it’s not about delivering more colourful, culturally diverse communities, even if many of us like those results. It’s supposed to make us all wealthier. That’s where Wellington economist Michael Reddell focused his attention and found, on the contrary, that after 25 years of these large, “planned” inflows of immigrants, we’re no better off at all. He unpicks the numbers with Virginia Larson.

Can our immigration policy be debated without descending into accusations of racism and jingoism?

I’d like to think so. Accusations of racism are mostly just cheap slogans. I heard [Immigration Minister] Michael Woodhouse at the National Party conference in July saying, “All the people who are opposed to immigration – it’s just racism and xenophobia.” I guess he was having a go at Winston Peters. But most of the discussion around my ideas has been on the economic analysis, without too much rancour. There might be some legitimate debates about what sort of people should be coming to New Zealand. But they’re not my issues.

Robert Muldoon once said, famously, that New Zealanders “wouldn’t know a deficit if they fell over it”. Is the government hiding or fudging some ulterior financial motive for why it’s holding fast to our immigration intake of 45,000-50,000 a year?

The fair point the National government makes is their policy is much the same as that of the previous government. The target level of non-citizen immigration has been pretty stable for about 15 years. The current total levels we’re seeing – around 70,000 a year – partly reflect the high levels of New Zealanders choosing not to go to Australia now, and those returning.

The question I’m trying to push the government on is whether that base level of 45,000-50,000 non-citizens each year is sensible? Are we – New Zealanders as a whole – getting any gains from this? I’ve done the OIAs, I’ve asked Treasury and MBIE for any work they’ve done in the last few years on the economic benefits of immigration. There’s nothing hidden. They just haven’t got any substantive analysis or evidence to support current policy.

Roger Partridge, chair of [business-funded economic think-tank] The New Zealand Initiative, wrote a column recently celebrating the great gains from immigration – claiming “countless studies” showed immigration increased the prosperity of the host nation. I responded, saying there was no such evidence in New Zealand. He conceded my point and said, “I never claimed there were any New Zealand studies… just overseas ones.”

Doesn’t the money these immigrants bring into the country make the economy look better?

It’s not so much that they bring money in. Some do, but most don’t bring much. It’s that they need somewhere to live, they need roads and shops. Their needs stimulate domestic economic activity. Consistent with this, Reserve Bank research over the years has always shown that when immigration numbers are up, interest rates also tend to rise because the increase in the population boosts spending by more – at least in the short-term – than it boosts the available resources in the economy. There’s a short-term sugar rush each time immigration surprises us on the upside.

So this is simply consumption-led growth?

It’s consumption and investment, but it’s not the sort of productive investment that builds export-oriented businesses. The key critical issue is, are we lifting GDP per capita? In fact, we’ve had the worst productivity performance of any advanced economy in the past 60 years.

This is not a judgment on how hard New Zealanders are working. But it seems to reflect the fact we don’t have the opportunities that would provide top-notch living standards in New Zealand for a large number of people. When you’re this remote, it’s difficult to build really top-notch businesses. Even if you build them – and we have some very smart, entrepreneurial people here – those businesses are going to be more valuable if you relocate them to Silicon Valley, or London or Hong Kong, because you’ll be nearer your markets, nearer your competitors, nearer the resources you need to make a complex, sophisticated business work.

You point out that New Zealand has one of the largest planned immigration programmes of any country in the world; that the US, for instance, issues green cards at about a third (per capita) of the rate we grant residence approvals. You’ve suggested we drop the annual intake to 10,000-15,000 people. So who’s currently benefiting from our very high rates of immigration? Who’s losing?

Exporters are losing. Even though kiwifruit growers or dairy farmers may get slightly cheaper labour, that just partly offsets the higher exchange rate; high rates of immigration tend to push up both interest rates and the exchange rate.

It’s the firms in the non-tradeable sectors who are benefiting most from mass immigration: firms servicing the domestic economy, doing things like developing fast-food franchises and building houses. There’s this really important distinction between the tradeable and non-tradeable sectors. The bit that’s competing with the rest of the world – the tradeable sector, the basis of our long-term prosperity – has been badly affected. We’ve skewed the whole economy towards meeting the domestic needs of the country. Per-capita output in the tradeables sector hasn’t increased for 15 years now.

Immigration drives up house prices. That benefits people holding onto land, and the generation about to sell their houses and retire from Auckland to Te Awamutu... But young people are losing because they can’t get into housing.

Of course, most immigrants are gaining, because if they weren’t they wouldn’t come here – or they’d go home again. What you can’t get directly from the national accounts data is the impact of the immigration policy on New Zealanders. So you have to approach the issue indirectly; I point out there’s just no evidence that in 25 years of this large-scale immigration policy, we’ve had faster per capita growth than other countries. So, if the immigrants are gaining, which they probably are, it suggests those ordinary Kiwis are probably losing. We’re richer than we were 25 years ago, but not as rich as we should be.

None of this is to criticise the immigrants. Far from it. They’re doing sensibly what our ancestors did, pursuing their best opportunities. My criticisms are of the policy-makers, not the immigrants.

If you cut back annual non-citizen immigration numbers to 10,000-15,000, individual employers mightn’t like it, but suddenly we wouldn’t need to devote so many resources to building houses and roads. Interest rates would be lower – and New Zealand interest rates have been far higher than other countries’ over the past 25 years. Lower interest rates would mean a lower exchange rate. The lower exchange rate would make it more economical for those export-oriented businesses to be based in New Zealand, creating jobs for the people displaced from building houses, roads etc. You’d still have the disadvantages of distance, but to some extent you’d compensate for that with the lower exchange rate.

Currently, we’re just bringing in people and, in effect, dumping them in Auckland. We don’t force them to stay there, of course, but if you’re a migrant from China or South Africa, you’re going to stay in Auckland because that’s where the Chinese and South African communities are concentrated.

Auckland, though, really doesn’t export stuff. The way countries – especially small countries – get rich is to export stuff. What you see in Auckland instead, besides the busy construction industry, is a proliferation of takeaway bars, cafes and $2 shops. And it’s there in the numbers: GDP per capita in Auckland is surprisingly low relative to the rest of the country.

In most countries, incomes in the biggest cities are far higher than those in the rest of the country. In Auckland, the margin is surprisingly small, and shrinking.

Aucklanders are certainly aware of the thousands of extra cars on the road. I’m not sure this is really boosting quality of life in the city.

Yes, you have to ask what the big gains are from this mass influx of people into Auckland. If the city’s GDP per capita growth was growing much faster than the rest of the country, you might say, hey, congestion is bad; it’s getting tough living here, but my income is growing rapidly. But incomes aren’t rising rapidly.

There’s also extra pollution and pressure on the land. Yet the Greens support our immigration programme?

It puzzles me why the Greens fall into line on immigration policies. They rightly highlight water pollution issues and carbon emissions – but don’t question pulling ever more people into New Zealand. To maintain our living standards with more and more people, we need to export more and more stuff: putting pressure on, for instance, extracting more milk from pollution-creating cows.