Monday 4th August 2008
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Wages for private sector workers, excluding overtime, increased 3.5%, matching the record annual pace in the previous two quarters, the highest in 16 years, Statistics New Zealand said. The annual pace lagged behind consensus for a pace of 3.6%.
Reserve Bank Governor Alan Bollard has predicted inflation will peak at 5% in the September quarter, giving him confidence to cut interest rates last month. New Zealand may have fallen into its first recession since 1998 in the first half of the year as GDP shrank in the first three months.
"While the wage peak remains elusive, the fact that the RBNZ has already started the easing cycle suggests they have sufficient confidence" that waning demand for labour will cool wage inflation, said Robin Clements, senior economist at UBS New Zealand.
Today's release of the Labour Cost Index and Quarterly Employment Survey will be followed by the Household Labour Force Survey on Thursday, expected to show the jobless rate rose to 3.8% while employment increased 0.2% in the June quarter.
"The data today does not change the economic picture," said Shamubeel Eaqub, director of Australia & New Zealand investment research at Goldman Sachs JBWere (NZ).
"Long lags in labour market data means that wage inflation is still high, but it is exactly this that may catalyse job shedding and cap wage bargaining power," he said.
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