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Home / Business / Economy / Official Cash Rate

Wage rises set to stall

By Andrea Milner
Herald on Sunday·
7 Jun, 2008 05:00 PM4 mins to read

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KEY POINTS:

The latest professional salary surveys shows employers giving staff raises between 3 and 6 per cent - but experts say increases will not be this high again for up to four years.

The annual Hays transtasman salary survey recorded the up to 6 per cent rise and the
Labour Cost Index also recorded an increase of 3.4 per cent in salary and wage rates for the March 2008 year - the highest annual increase recorded since the series began in the December 1992 quarter.

But ANZ chief economist Cameron Bagrie says the economic downturn means increases will reduce - "everybody's got to give up a little bit," says Bagrie.

Economists may suggest a salary slow-down, but unions say the cost of living will still require increases.

And Hays' managing director New Zealand Jason Walker says those with a skill in high demand will still have leverage to get more money.

"I don't think we've seen the end of salary increases, because it's human nature that if costs go up, employees try to get more money from their employer to cover them," Walker says.

Last week Reserve Bank governor Alan Bollard warned businesses that raising salaries will exacerbate his inflation woes, but recruiters say the threat of losing talent is greater. The cost of finding and hiring new talent can be significantly higher than retaining it.

Statistics New Zealand's Household Labour Force Survey showed 29,000 jobs were lost in the quarter to March. Council of Trade Unions economist Peter Conway says although some economists are saying that with more job losses, wages will trend down, living cost pressures are real, and a rather tight labour market with competition for workers still predominates.

"We need wages to rise in any case in New Zealand," he says.

"Households are not going to be able to lift incomes with more and more hours of work, they are going to find it hard to take on more debt - particularly with house prices falling - and the key issue now is going to be wages."

He says the CTU believes it is possible to have reasonable wage increases in line with productivity rates that don't have to fuel inflation.

On average, New Zealand salaries are still 25 per cent lower than in Australia across the board, says Walker, "and in a lot of industries that figure is significantly higher".

However, he says there is an argument that New Zealand employees are 25 per cent less productive on average than their Australian counterparts.

This is not because Kiwis work less, but due to lost time travelling to work with transport deficiencies, and because "in a number of industries we just don't have the talent available in the marketplace to perform the tasks in certain roles".

WHO'S GETTING THE BIG MONEY

Professional services employers gave above-average salary increases - 45 per cent of them rises above 6 per cent - and accountancy and finance were the salary increase "hotspots" in the latest Hays survey.

Management accountants' salaries in Auckland increased from $90,000 to $100,000 in companies whose turnover exceeded $150 million. Hays' managing director Jason Walker says there is "huge" demand for chartered accountants. As soon as they qualify they have opportunities within large corporate organisations.

Thirty-eight per cent of construction, property and engineering employers also gave rises of more than 6 per cent, flying in the face of the property market slowdown. Walker says that's because commercial property activity is still strong.

With current investment in infrastructure, he says an "incredible" amount of work is going on in civil construction and medium-to-large construction projects.

The human resources area also saw big salary increases. Auckland HR directors' salaries jumped from $175,000 to $180,000. Demand is driven by the need to recruit and retain talent in a tight labour market.

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