By Gareth Vaughan Salaries and wages rose just 1.5% in the year to March, their lowest annual increase since the year to September 2000, Statistics New Zealand's Labour Cost Index for the March quarter shows. (Update includes ASB economist Jane Turner's comments). Government statistician Geoff Bascand said salary and wage rates, including overtime, rose for both the public and private sectors during the year to March, up 2.3% and 1.3%, respectively. Meanwhile, salary and wage rates, also including overtime, climbed 0.3% in the March quarter with public sector rates up 0.5% and private sector rates 0.3% higher. "The latest annual increase shown in the Labour Cost Index is the lowest since the year to the September 2000 quarter, when salary and wage rates recorded an identical 1.5% gain," Bascand said. Also out today, the Quarterly Employment Survey shows a slowdown in annual average earnings growth continuing. Average total hourly earnings climbed 2.1% for the year to the March. That's down from a 3.7% increase in the year to December 2009. "The latest annual increase in average total hourly earnings is the lowest since the year to the December 2004 quarter when 2.1% was also recorded." ASB economist Jane Turner said wage inflation was slightly weaker than expected and only just below the Reserve Bank’s March Monetary Policy Statement forecasts.
Today’s results alone would be unlikely to strongly sway the RBNZ either way (toward a June or July OCR hike). Subdued income growth continues to weigh on consumer confidence, with the majority of household’s noting they remain worse of relative to a year ago in confidence surveys. However, indicators of employment strongly suggest the labour market has turned and the RBNZ can be increasingly confident of the underlying economic recovery taking place. The focus turns to Thursday’s household labour force survey. The strength in full-time employment in today’s report along with the pick-up in hours worked, backs our view of employment growth over Q1. We are expecting to see a 0.3% increase in employment, which will see the unemployment rate fall to 7.1% (from 7.3% previously).
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