A surge in the numbers of overstayers and increased fraud and exploitation work is overstretching Immigration New Zealand's compliance officers, the agency says.
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The agency's figures show the number of overstayers rising for the first time since 2000, and more than half of all overstayers have been in the country illegally for more than six years.
The agency told Immigration Minister Iain Lees-Galloway, in a memo written in March, that the work required to manage overstayers was too much for its resources.
The memo said the "volume of work required to manage the risk from overstaying in the system while supporting compliance sectors and employers has outgrown Immigration New Zealand's capacity and reach".
Between 2016 and last year, the number of deportations rose by a third.
They have also become costlier, because more security escorts are needed to accompany high-risk deportees. The cost now stands at $1.78 million, up by 44 percent on three years earlier.
Voluntary departures of overstayers look likely to exceed the numbers of any year on record this year.
Despite the deportations and voluntary departures, the memo suggests people living in New Zealand illegally are on the increase.
It says work to counter rogue employers exploiting immigrants, and to ensure educational institutions meet their immigration obligations has overstretched the 40 compliance officers who operate across New Zealand to catch overstayers.
Mr Lees-Galloway told Morning Report the government was taking action including $34m in extra money for Immigration New Zealand already announced in the Budget.
That money was for hiring 29 extra staff over four years to increase screening and assessment of people coming into New Zealand.
"The purpose of that is to identify the people who we think are a higher risk of overstaying and deny them entry to the country in the first place. That then frees up resources for those compliance officers."
"We have invested more money in Immigration New Zealand in this year's Budget" - Ian Lees-Galloway
Mr Lees-Galloway said the government was also consulting on a new fees and levies system for the immigration system to ensure it was properly funded. "Those fees and levies will be set later on this year."
Figures show overstayers from Fiji, Kiribati, Samoa, Tonga and Tuvalu make up 48 per cent of the total estimate of overstayers.
Association for Migration and Investment chair June Ranson, said some of the increase in overstayers was due to delays in visa processing.
Immigrants on an interim visa while their application is assessed become illegal the moment their application is refused.
Ms Ranson said Immigration New Zealand had also been having to do too much with too little, and the agency had to make a decision on priorities.