Inflation Outpaces Consumer Wages

02 August 2011 - Which Way to Pay

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Inflation Outpaces Consumer Wages

According to a Reuters survey of economists, wages in New Zealand grew at a slower pace than headline inflation as the labour cost index fell short of the 0.5% predicted. The labour cost index rose 0.4% in the three months ending June 30, with state sector staff getting smaller pay increases than their private sector counterparts according to Statistics New Zealand data. The figures support the central bank’s view that consumer price index changes shouldn’t justify a reason to hike pay rates.

Overall the latest statistics take annual wage inflation to 1.9%, which lags behind the forecasted 2.1% and is well short of the annual pace of inflation which has reached 5.3% largely encouraged by rising goods and service taxes.

The total private sector wage rate has grown this quarter to an average of $24.28 per hour which is faster than expected. In data from the Quarterly Employment Survey this average is still below that of public servants wages which average at $33.28, bolstering the average to $26.27 per hour.

The rate of employment is expected to have held at 6.6% in the quarter although Thursday’s Household Labour Force Survey will shed more light on unemployment data. However, a Reuters survey leads us to suspect employment participation will have fallen 0.3 percentage points to 68.4%.

Professionals, scientists and technical workers where at the forefront of wage gains in the quarter, rising 3.1%, followed by metal product manufacturers, who got a 2.8% gain. Conversely, Central government administration, defence and public safety staff and health care and social assistance had the smallest increase at just 0.1%.

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