New Zealand's Wages Probably Accelerated on Shortage of Workers
By Tracy Withers
Nov. 2 (Bloomberg) — New Zealand's annual wage inflation probably accelerated in the third quarter because a record-low jobless rate prompted companies to pay more for workers.
Ordinary time wages for non-government workers rose 0.8 percent from the second quarter, when they gained 0.7 percent, according to the median estimate of 12 economists surveyed by Bloomberg News. From a year earlier, wages probably increased 3.1 percent, matching a record. Statistics New Zealand publishes the figures at 10:45 a.m. in Wellington on Nov. 5.
Rising wages may stoke consumer spending, adding pressure to inflation and ensuring Reserve Bank Governor Alan Bollard won't cut the benchmark interest rate from a record 8.25 percent anytime soon. Bollard said last month a tight labor market may lead to sustained inflationary pressures.
“We can't see any real guarantee that inflation is going to come out of the system until the labor market comes off,'' said Craig Ebert, senior markets economist at Bank of New Zealand Ltd. in Wellington. “Over the past 18 months, wage increases have started to show how tight the labor market is.''
In September, Bollard forecast annual inflation will accelerate to 3 percent by the end of 2007 and 3.1 percent a year later. He is required to keep price increases between 1 percent and 3 percent.
Eleven of 16 economists surveyed by Bloomberg News say the central bank will keep the official cash rate unchanged at 8.25 percent until at least June 30 next year. Three expect a cut before then and two predict an increase.
Wages rose 3.1 percent in the year ended June 30, the biggest increase since the statistician began the series in 1992. They gained 2.5 percent the previous fiscal year.
Pay rates are underpinned by a shortage of skilled workers, falling immigration and record-high workforce participation rates, which mean most of the people wanting a job have one, Ebert said.
In the third quarter, 44 percent of 456 companies surveyed by the New Zealand Institute of Economic Research said it was harder to find skilled workers than in the previous three months.
Job vacancies advertised in the nation's major newspapers rose for a third straight month in September, suggesting employers are finding it harder to recruit workers, according to Labor Department figures.
Annual immigration growth fell to a 19-month low in September with arrivals exceeding departures by just 8,309, according to a government report on Oct. 19.
A report on Nov. 8 will probably show New Zealand's jobless rate remained at a record-low 3.6 percent in the third quarter, according to the median estimate of 12 economists surveyed by Bloomberg News. The labor force participation rate rose to a record 68.8 percent in the second quarter.
Manufacturers such as Fisher & Paykel Appliances Holdings Ltd. and Cadbury Schweppes Plc plan to close factories in New Zealand because of escalating costs. Workers from those plants are unlikely to be out of a job for long, said Ebert.
“We've run out of employable people,'' he said. “There's so much demand that even when people lose their jobs they are just getting snapped up.''
Total wages for non-government workers, which includes overtime, probably also rose 0.8 percent in the quarter for an annual gain of 3.1 percent, according to six economists who forecast that series. That's slower than the 3.2 percent pace in the year ended June 30.
The central bank expects total wages will rise 3.1 percent in the year ending March 31, 2008, according to its latest forecasts published on Sept. 13.
A second report due on Nov. 5 will show average ordinary time hourly earnings for non-government workers rose 1.1 percent in the third quarter, according to the median forecast of nine economists. Hourly earnings rose 1 percent in the second quarter.
Following is a table of forecasts for the non-government labor cost index for ordinary wages and for average hourly earnings.
Labor Cost Avg. Hourly
Ordinary time Earnings
Qtr Year Qtr Year
Median 0.8% 3.1% 1.1% 3.4%
Number 12 12 9 9
ANZ Bank 0.9% 3.2% 2.0% 4.4%
ASB Bank 0.7% 2.8% 0.9% 3.3%
BNZ 0.8% 3.1% 1.8% 4.2%
Barclays 0.8% 3.1% — —
Citibank 0.8% 3.1% 0.8% 3.1%
Deutsche 0.8% 3.1% 1.7% 4.0%
First NZ 0.8% 3.1% 1.8% 4.2%
Goldman 0.7% 3.0% 1.1% 3.4%
Macquarie 0.9% 3.2% — —
TD 0.6% 2.9% — —
UBS 0.6% 2.9% 1.0% 3.3%
Westpac 0.8% 3.1% 0.8% 3.1%
To contact the reporter on this story: Tracy Withers in Wellington at email@example.com .
Last Updated: November 1, 2007 07:01 EDT