New Zealand Unemployment at Record Lows as Wages Climb

Pedestrians make their way down Queen Street in Auckland, New Zealand, on Sept. 24, 2020. Hannah Peters/Getty Images

New Zealand’s unemployment rate remains at a record low 3.2 percent for the second consecutive quarter, as annual wage growth hits its highest levels in 13 years, according to Statistics NZ.

Yet, the body noted that the Omicron wave in January caused significant levels of absenteeism, bringing down the actual number of worked hours during the quarter.

“This was due in part to more people working fewer hours or being away from work than is typical for a March quarter,” Becky Collett, work statistics senior manager at Stats NZ, said in a statement.

Underutilisation levels edged slightly higher, up 0.1 percentage points from the previous quarter to 9.3 percent.

“Quarterly increases in underutilisation levels came primarily from growth in available potential jobseekers—those who want and are available to work, but not currently looking,” Collett said.

Meanwhile, wage inflation reached 3 percent in the March quarter, accelerating to almost double the rate compared to the same quarter in 2021.

But the figure still remains lower than the annual consumer price inflation of 6.9 percent.

“Wage increases have typically exceeded consumer price increases over the past ten years,” Bryan Downes, business prices manager for the Stats NZ said in a release. “In the last four quarters, despite stronger wage growth, wage inflation has been lower than consumer price inflation.”

NZ Finance Minister Grant Robertson said the figures were a “very positive” result in a challenging environment.

“The results also show New Zealand has once again performed favourably against the countries we measure ourselves with New Zealand’s unemployment rate the sixth equal lowest in the OECD,” Robertson said.

“While hours worked fell as Omicron affected worker attendance through illness and self-isolation, businesses are continuing to hire despite the pandemic, ongoing supply chain disruptions and the Ukraine war,” he added.

Finance Minister Grant Robertson during his press conference after it was announced the country will move to red traffic light settings, at the Beehive in Wellington, New Zealand, on Jan. 23, 2022. Mark Mitchell-Pool/Getty Images

ANZ Bank Chief Economist Sharon Zollner believes the labour market will tighten further over the year and noted that wages growth was accelerating faster than expected, particularly for average hourly earnings.

The data was also a confirmation for the Reserve Bank of New Zealand (RBNZ) that the labour market will be a key driver of domestic inflation pressures this year, she said.

“This will require ongoing interest rate hikes to bring labour demand back in line with labour supply and nip a potential wage-price spiral in the bud,” she added. “That’s consistent with our expectation for a 50 basis points hike in May.”

She also warned that the labour market, which is currently not capable of meeting demand, may tighten even further if a significant number of Kiwis are lured across the ditch by Australia’s own tightening labour market.

“This is a highly inflationary process, given that productivity is not rising as quickly as wages,” Zollner said. “In turn, that would mean any benefit workers may expect from a tight labour market is simply eaten away by inflation.”

The RBNZ will meet on May 25 to discuss the next move on its monetary policy.