The shaky financial situation is seeing immigrants squeezed out of the New Zealand labour market.

Some 7000 fewer work permits were approved in the year to the end of June, compared with the previous year.

New Zealand depends on immigration to maintain its population and to fill skill shortages.

However, with unemployment at 6.8%, the Immigration Department says jobs for New Zealanders must be the priority.

Immigration's policy is to decline to renew temporary work permits if there are New Zealanders out of work who could do the job.

The department says it believes the flow of immigrants coming to work here will revive when the economy picks up.

It says the annual target of having 45,000 - 50,000 people coming to settle here permanently is still being met.

But Auckland University economics Professor Sholeh Maani says a reduction in immigration decreases growth.

In Auckland, 40% of the population are from overseas and overall, 25% of New Zealand's workforce is foreign born.

(Source Radio New Zealand)