Wages and salaries outpace inflation

Unadjusted wages and salaries increased 5.5 percent in the June quarter from the June 2005 quarter, outpacing the 4.0 percent inflation rate, according to Statistics New Zealand figures today.

However, the June quarter figure is slightly down from the 5.7 percent figure recorded in the March quarter, which was a record for the 11-year-old series.

The median annual increase workers received during the June quarter was 4.2 percent but only around 40 percent of those surveyed received a rise.

The quarterly Labour Cost Index Survey showed salary and ordinary time wages rose 0.7 percent in the June quarter for a 3.2 percent annual rise. Public sector rises were 1.0 percent in the quarter for an annual 4.1 percent rise, while private sector rates rose 0.6 percent for a 2.9 percent annual rise.

Those rises were in line with economists' forecasts.

At the same time, SNZ released its quarterly employment survey which showed a 0.7 percent increase in full-time equivalent (FTE) jobs in the June quarter. Over the year, FTEs rose 4.0 percent.

The education industry recorded a 15.6 percent increase in FTE posts, driven largely by part-time employment.

Over the year, most jobs were created in the transport, storage and communication, education and construction industries. More fulltime jobs were created than part-time jobs.

Average hourly earnings in the private sector rose 2.3 percent in the quarter and 4.9 percent over the year, to $20.47. Total hourly earnings rose 1.2 percent in the quarter and 4.4 percent in the year, to $21.90. Private sector earnings were up 2.3 percent for the year while public sector earnings rose 4.9 percent.

Seasonally adjusted total hours paid increased 3.2 percent and gross earnings rose 7.7 percent.

ANZ Bank economist Khoon Goh noted much of the increase in employment came from the education sector.

"So if you take that out, the underlying figure shows other sectors are stripping jobs, particularly in retail and manufacturing."

He said the Labour Cost Index showed some moderation in wage growth, "but there is still going to be some persistent wage pressure to come in the next few quarters and we think wage inflation will stay around 3 per cent and elevated for some time".

UBS economist Robin Clemens believes today's data was a turning point, and wages growth had passed its peak.

"We won't know for sure if it is a turning point for another three months, but it's encouraging.

"On the surface, this is favourable for the central bank and adds to the case for an easing sooner or later."

Goldman Sachs JBWere economist Shamubeel Eaqub said the data was consistent with the lagged impact of a skilled labour shortage going through the economy but agreed wage inflation appeared to have peaked.

"It shows that wage inflation was still pretty high, but may be close to a peak."

- NZPA