New Zealand workers became more optimistic about their job prospects in the December quarter, with employees feeling more secure and expecting future pay rises. However, confidence remained well down on sentiment a year earlier as unemployment moves higher, with people only slightly less gloomy about their current employment conditions.

The Westpac-McDermott Miller Employment Confidence Index rose 2.2 points to 101.5 in December, gaining from the three-year low it reached in the September quarter. A reading above 100 indicates optimists outweigh pessimists. The present conditions index rose to 94.2 from 92.9 and the employment expectations index advanced to 106.4 from 103.6.

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Westpac Bank senior economist Anne Boniface warned against getting carried away, saying overall confidence levels are still "well down from what we saw in 2014, indicating that workers have not entirely stopped fretting about employment conditions".

The index had hit 111.5 in the September quarter of 2014, as confidence in Canterbury buoyed the nation's outlook. Canterbury has seen a marked deterioration in employment expectations, down 4.8 points to 103.7 in the latest survey.


Boniface said this was consistent with Westpac's view that reconstruction work has peaked, and workers realise jobs may not be quite as plentiful in the future as they are now.

Nationwide unemployment - which hit 6 per cent in the September quarter and is expected to peak at 6.5 per cent this year - has coincided with lower confidence this year, Boniface said.

The survey's measure of current job opportunities remained firmly pessimistic about job availability, improving only slightly to a net negative 33.3 per cent from a net negative 33.5 per cent in the September survey.

Workers became noticeably more upbeat about both the potential for future earnings growth and their own job security.


Expected job opportunities in a year's time also crept up to a net negative 19.3 per cent pessimism rating from net negative 19.9 per cent. Expected earnings growth over the next year improved, with 26.3 per cent of employees expecting their earnings to rise, up from 22.7 per cent in September.

Employees expecting their personal job security to improve rose to 12.3 per cent from 7.9 per cent.

"Workers became noticeably more upbeat about both the potential for future earnings growth and their own job security," Boniface said. "However, this bounce in expected earnings comes after the series hit rock bottom last quarter. The number of people expecting to earn more this time next year is still at its second lowest level since the survey began in 2004.

"It's not hard to see why so few workers are expecting a fatter pay packet over the next year. Unemployment rose steadily over the course of 2015, and at the same time inflation remained below 1 per cent. Add the two together and the chips look to be stacked firmly in favour of employers at the negotiating table."

All regions became more confident in December, apart from Canterbury, Wellington and Waikato, with the Waikato now recording the lowest level of confidence in the country, at 93.7, which Boniface said may reflect weakness in dairy and fears that employment prospects could be dented by both a low payout and an El Niño event this summer.

Auckland was the most confident region in the country, with a reading of 105.9.