Wage and salary data bad news

Jane Turner
Jane Turner
Wage and salary rates data released yesterday contained little good news for New Zealanders finding it tough to cope with rising bills.

Economists are also now predicting that the Reserve Bank is becoming so worried about inflation that it will lift its official cash rate by 0.5% to 3% in September, placing further pressure on prices and interest rates.

Statistics New Zealand's measure of salary and wage rates shows a rise of 1.9% in the year to June, while another measure shows average hourly earnings up 3.1%.

The labour cost index (LCI) also showed salary and wage rates including overtime up 0.4% in the June quarter.

The quarterly employment survey (QES) showed that along with the 3.1% rise in hourly earnings, the number of full time equivalent employees rose 0.4% over the year to 1.33 million.

The LCI measures changes in salary and wage rates for a fixed quantity and quality of labour, while the QES reflects changes in wages and salaries along with compositional and other changes in the paid workforce.

ASB economist Jane Turner told the Otago Daily Times that wage inflation increased in line with expectations.

"Wage growth continues to recover gradually, although remains relatively subdued. The relatively elevated level of unemployment continues to mute the growth in rates."

However, in the coming year, growing labour demand and a re-emergence of skill shortages in some areas would feed through to stronger wage inflation, she said.

Statistics NZ noted that wages in the construction industry were rising faster in Christchurch than the rest of the country. That suggested rebuilding demand started to increase in June, with stronger wage growth reflecting the tight supply of construction labour resources in Christchurch in the coming year.

Ms Turner said the Reserve Bank would be wary of inflation pressures generated by the reconstruction activity and the potential for those to spill over into the wider economy.

According to the QES average total weekly earnings by full time equivalent employees rose 4% over the year to $1007, the largest rise in two years, while the rise from the March quarter was 1%.

Total paid hours rose 1.6% in the year to June, the fifth consecutive yearly increase, while seasonally adjusted total paid hours rose 0.7% for the June quarter.

The rise in paid hours for the quarter was slightly better than expected, with the median forecast in a Reuters poll having been for a gain of 0.5%.

Council of Trade Unions economist Bill Rosenberg said said the LCI showed wages were still falling behind inflation of 5.3%.

Public sector rates rose only 1.5% in the year to June compared to 2% in the private sector.

"This will make people more determined to ensure their wages do not fall in value."

There was a welcome increase in the number who had received increases during the year - 56% rising to 58%.

But with a median of 2.9%, most had received increases less than inflation and 42% of people had not had any wage increase through the year, he said.

 

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