Bloomberg News

N.Z. Second-Quarter Wages Rise at Faster Pace, Gaining 0.5%

August 01, 2011

Aug. 2 (Bloomberg) -- Wage gains in New Zealand accelerated in the second quarter, adding to signs of inflation pressure that may require the central bank to raise interest rates this year from a record low.

Pay for non-governmental workers excluding overtime increased 0.5 percent from the first quarter, when they gained 0.4 percent, Statistics New Zealand’s labor cost index released in Wellington today showed. The result matched the median forecast in a Bloomberg News survey of 10 analysts.

Income is growing as New Zealand’s economy recovers from a lull in consumer and company spending last year and a series of earthquakes that devastated the southern city of Christchurch. Central bank Governor Alan Bollard last week signaled he is preparing to raise the official cash rate from 2.5 percent to counter inflation pressure.

“Given reports that firms are beginning to find it more difficult to find skilled staff, we do expect wage growth will gradually increase,” Philip Borkin, economist at Goldman Sachs & Partners New Zealand Ltd. in Auckland said in a July 29 note.

New Zealand’s dollar was little changed after the report. It bought 87.59 U.S. cents at 11:07 a.m. in Wellington from 87.61 cents immediately before the release.

Annual wage growth in the second quarter accelerated to 2.1 percent from 2 percent in the prior quarter, today’s report showed.

Quake Damage

New Zealand’s economic growth slowed in the second half of 2010 as consumers paid back debt rather than spend, while business investment was subdued. A magnitude 7 earthquake near Christchurch on Sept. 4 disrupted spending before a Feb. 22 earthquake close to the city killed more than 180 people and shut the central business district.

Gross domestic product rose 0.8 percent in the first quarter, more than twice the central bank’s expectations, as spending and investment picked up elsewhere in the country.

Bollard responded to the February temblor by cutting the official cash rate by half a percentage point in March to revive confidence. Eight of 12 economists surveyed by Bloomberg News on July 28 predicted Bollard will return the cash rate to 3 percent at his next review on Sept. 15. Two predicted a quarter-point rise and two forecast no change.

Buoying wage growth, the jobless rate probably fell to 6.5 percent in the second quarter from 6.6 percent in the first three months of the year, according to a Bloomberg survey of 10 economists ahead of an Aug. 4 government report.

Average ordinary-time hourly earnings for non-governmental workers rose 1.2 percent in the quarter, the statistics agency said in its quarterly employment survey, also published today.

Demand for labor was stronger in the second quarter, the survey also showed. The number of full-time equivalent employees rose 0.7 percent from the first quarter as part-time work in education, health care and social assistance increased, while full-time jobs were little changed.

Filled jobs rose 1.3 percent from the first quarter, led by education, the statistics agency said. Filled jobs declined 0.3 percent from the year-earlier quarter.

--With assistance from Daniel Petrie in Sydney. Editors: Brendan Murray, Malcolm Scott

To contact the reporter on this story: Tracy Withers in Wellington at

To contact the editor responsible for this story: Stephanie Phang at

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