The spectre of wage inflation made its presence felt on the Kiwi dollar today when it shot higher on the back of stronger than expected labour data, which showed the unemployment rate fell to a nine-year-low of 4.6 per cent in the September quarter.

Statistics NZ said the data showed labour use at historically high levels, with both employment, at 67.8 per cent, and labour force participation, at 71.1 per cent, hitting record highs.

Pay-equity settlements pushed up annual private-sector Labour Cost Index (LCI) wage inflation to a 5-year high, but there were few signs of widespread wage pressures.

ANZ senior economist Sharon Zollner noted the New Zealand dollar had taken a pounding, post-election, but shot up from US68.49c before the data's release to a peak of US69.14c on the back of the data, later settling back to about US69c.

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The kiwi had fallen from US71c just before NZ First Leader Winston Peters announced the formation of a Labour-led coalition government on October 19.

Zoller was sceptical about the quarterly numbers, which she said can be volatile.

"We suggest that there is more quarterly noise than usual in the figures," she said.

"In particular, Auckland job ads data has been quite weak for the last five months straight, whereas the data showed a very strong increase in employment in Auckland.

"That said, it is hard to argue with employment growth of around 4 per cent, year-on-year," she said.

Economists said the Reserve Bank would look at the labour market closely for signs of inflation, particularly given the new Government's intention to raise wages.

The official cash rate sits at 1.75 per cent and the bank's forecasts indicate it will not be looking at a rate hike until the end of 2019.

Private-sector economists expect the official cash rate to increase a year earlier - towards the end of 2018.

ANZ's Zoller said today's data was not enough to get the Reserve Bank "off the fence ... but it does shift the dial towards an earlier rate hike".

Kiwibank, in a commentary, said the labour data supported its view that inflation is likely to rise faster than the Reserve Bank is forecasting.

"We maintain our view that the Reserve Bank will begin official cash rate hikes in late 2018 - almost a year earlier than the RBNZ has signalled," Kiwibank said.

The Reserve Bank is due to publish its next monetary policy statement, including forecasts, on November 9.

Statistics NZ's Diane Ramsey said the increase in the labour participation rate was "little puzzling", but she said the department was confident in the integrity of the data.

"This is in line with stronger quarterly working-age population growth and near record high annual net migration," she said.

Stats NZ's labour market data also included the labour cost index, which showed private-sector wage inflation rose 0.7 per cent in the quarter for a 1.9 per cent annual increase.

Public-sector wage inflation was up 0.4 per cent in the quarter for a 1.5 per cent annual gain, and across both sectors wage inflation rose a quarterly 0.6 per cent and an annual 1.9 per cent - the highest annual rise since the September 2012 quarter.

The data was affected by the Care and Support Workers Settlement Act, which came into effect on July 1.

The quarterly employment survey showed private-sector ordinary-time average hourly earnings rose 1.2 per cent to $28.37 in the September quarter and were 2 per cent higher than a year earlier.

Public-sector ordinary-time wages rose 0.6 per cent to $38.69 in September for an annual gain of 3.3 per cent.

- Additional reporting BusinessDesk