A national security business has begun paying its Auckland staff a special housing allowance or "pain money" to compensate them for living in New Zealand's most expensive city.

Advanced Security Group chief executive Michael Marr said an extra $2 an hour was being paid to Auckland staff at the firm, which employs about 150 people. Of those, 45 are in Auckland.

"It's a way to recognise the pain," he said of the extra allowance.

BNZ chief economist Tony Alexander said that was nowhere near enough to compensate people financially for living in Auckland.

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"It's not reasonable for people to expect extra money for living in a more expensive city because there are lots of other benefits," Alexander said, citing greater job opportunities, more chance for promotion, connectivity and educational advantages.

Realestate.co.nz chief Peter Mangin said: "Good on them for recognising it and doing something about it. If it was a 20-year-old in a flatting situation with four others, it would make a difference."

Marr said the extra money was specifically aimed at helping with housing.

"We call it the Auckland housing allowance and that's what goes on their pay slips. This came in on May 1. We hear from staff all the time about the costs of Auckland and there's been a drift to Hamilton, Tauranga and elsewhere and that affects us."

Auckland staff had sought transfers to Wellington and Christchurch, he said, mainly because of housing issues in Auckland.

"The extra $2/hour has been approved for the next two years. Staff have given great responses," he said.

Staff earn $25 to $45 an hour: "It's pretty good money because this is quite a niche market and a specialised trade."

Marr knew of no other employers who had increased rates but said Advanced Security had also struck a deal with ASB Bank: "It's a special package for our staff on mortgage rates and credit cards and there's a dedicated person to work with us and our people."

Advanced has branches in Whangarei, Auckland, Hamilton, Kawerau, Napier, Rotorua, Tauranga, New Plymouth, Taupo, Palmerston North, Whanganui, Wellington and Christchurch.

Clients include the New Zealand Defence Force, Police and Genesis Energy, Marr said.

Statistics NZ's latest labour market quarterly survey showed employment growth continued to exceed population growth and wage growth remained steady lately.

"The annual increase in salary and wage rates for all sectors remained at 1.6 per cent for the third quarter in a row. This measure of wage inflation reflects changes in the rates that employers pay to have the same job done to the same standard," Statistics NZ said.

"Average ordinary time weekly earnings from the Quarterly Economic Survey increased 2.1 per cent in the year ending March 2017, bringing them up to $1133.38."