Wages not keeping up with inflation, say new job stats

New Zealand wages grew at a slower pace than headline inflation, helping support the central bank's view that the jump in the consumer price index shouldn't be used as a reason to hike pay rates.

The labour cost index rose 0.4 per cent in the three months ended June 30, falling short of the 0.5 per cent predicted in a Reuters survey of economists, as state sector staff got smaller pay increases than their private sector counterparts, according to Statistics New Zealand data. Public sector wages rose 0.3 per cent in the quarter while private sector earnings gained 0.5 per cent.

That took annual wage inflation to 1.9 per cent, lagging the 2.1 per cent forecast, and well-short of the 5.3 per cent annual pace of inflation, which has been stoked by the increase in goods and services tax.

Total private sector wage rates grew a faster-than-expected pace of 1.3 per cent in the quarter to $24.28 an hour, according to the Quarterly Employment Survey. That's still below the $33.28 wage rate for public servants, which bolsters the average to $26.27

Last week, Reserve Bank Governor Alan Bollard warned of rising wage pressures, though he talked down headline inflation, saying the underlying figure was within his target band of between 1 per cent and 3 per cent.

The rapid rebound in New Zealand's economy has given Bollard reason to remove the 50 basis point cut he made in March in response to the Canterbury earthquakes, though he says the strength of the kiwi dollar will likely limit any further hikes.

That has helped employers become more upbeat in their hiring intentions, and a net 18.9 per cent of respondents in last month's National Bank Business Outlook want to take on more staff in the next 12 months.

Full-time equivalent jobs rose 0.7 per cent to 1.33 million in the June quarter, though the bulk of that was made up by more part-timers equating to some 20,000 full-time jobs, according to the QES. Total filled jobs rose to 1.69 million from 1.67 million in the prior quarter.

Total paid hours rose 0.7 per cent in the period to a seasonally adjusted 50.86 million.

Education and training sectors added the most jobs in the quarter, with an additional 29,000 positions, while construction and accommodation and food sectors each shed about 4,000 jobs.

That comes ahead of Thursday's Household Labour Force Survey, which is expected to show the unemployment rate held at 6.6 per cent in the quarter, with employment participation falling 0.3 percentage points to 68.4 per cent, according to a Reuters survey.

Professionals, scientists and technical workers led the wage gains in the quarter, rising 3.1 per cent, followed by metal product manufacturers, who got a 2.8 per cent gain. Central government administration, defence and public safety staff and health care and social assistance had the smallest increase at just 0.1 per cent.

The period was the first to incorporate Canterbury data since the February earthquake, and the region cut full-time equivalent employees by 4.5 per cent, the biggest cut since regional estimates began in September 1999.

- BusinessDesk

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