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Unemployment has fallen to a nine-year low in New Zealand but more jobs are needed and there has been very little movement in wage levels, hardly lifting in a way to suggest broader inflation is about to be unleashed.
Statistics New Zealand's labour market statistics showed unemployment fell to 4.5% in December, below market expectations of 4.7%.
The participation rate was 71%. Measures of labour utilisation were at historically high levels.
ASB chief economist Nick Tuffley said the tight labour market kept the bias tilted towards a higher official cash rate but the contained backdrop for wage inflation suggested no immediate need for the Reserve Bank to deviate from its on-hold stance.
''The Reserve Bank will be closely following developments in wage inflation for guidance on future OCR moves.''
Unemployment was expected to fall below 4% during the next 12 months, he said.
Tightening labour market capacity and government policy changes were generally expected to underpin higher rates of wage growth. There was still some uncertainty over the extent to which wages would rise and the impact on consumer prices.
The low 2018 outlook for consumer price inflation - expected to be closer to 1% than 2% - and the contained backdrop for wage inflation continued to provide the Reserve Bank with valuable breathing space.
''Our core view remains for the OCR to remain on hold until at least 2019,'' Mr Tuffley said.
Employment Minister Willie Jackson welcomed the lower unemployment but said the Government would not be complacent about meeting the needs of all New Zealanders who wished to work.
There were discrepancies the Government needed to address.
The employment rate showed a record high and the unemployment rate for Maori was the lowest in a decade.
However, the unemployment and underutilisation rates for Maori were still significantly higher than those of the general population, he said.
The latest figures also showed 122,000 people were part-timers wanting more hours.
The underemployment rise of 7000 people to 122,000 took it to the highest level on record.
The increase in underemployment was mainly driven by females, up 6000 to 84,000.
Statistics NZ said the underutilisation data provided a more comprehensive view of changes in New Zealand's labour market than the unemployment rate alone. It better captured differences in groups of interest to policymakers.
Mr Jackson said a further 99,000 people wanted work but were either not actively looking or not immediately available for work, for various reasons.
Those numbers were on top of the 122,000 people who were unemployed and were actively looking for work.
''This presents an opportunity to make real differences for the groups who were left behind by the previous government.
''This will be the key focus for this Government's employment policy, particularly for Maori, Pasifika and women.''
The Government previously announced it would invest $13 million in youth employment programmes in regions with entrenched unemployment, he said.
Many more steps would need to be taken to ensure New Zealanders benefited from better wages and living conditions through participation in meaningful employment, the minister said.
The National Party said the strong employment meant there was no need for law changes.
Employment spokesman Paul Goldsmith said the job for the new Government must be to ensure it did not take the progress for granted.
The Government inherited a very strong labour market and it was encouraging to see unemployment continuing to fall.
''That's a credit to the hard work of all our businesses and workers.''
The flexible labour market encouraged businesses of all sizes to grow their workforces and with unemployment at a nine-year low, it was difficult to see why reforms were needed, he said.
It was up to the Government to explain why it was making changes that would undermining the strong results seen yesterday, Mr Goldsmith said.