KEY POINTS:
Wages were still climbing steeply in the September quarter but economists expect gravity, in the form of rapidly softening demand for labour, to bring them down to earth before long.
Statistics New Zealand's labour cost index recorded a rise of 1.1 per cent in private sector ordinary time
wages, equalling the largest quarterly increase in the 16-year history of the series and well above the 0.8 per cent the market expected. It pushed the annual increase to 3.7 per cent - nearly twice the rate prevailing five years ago.
A broader measure, which includes overtime and the public sector, also rose 1.1 per cent, making 3.6 per cent for the year.
These are "quality adjusted" measures, intended to measure changes in the rate for the job. They filter out increases related to performance of individual employees.
The unadjusted measure, a better guide to what is happening to private sector payroll costs, rose 1.5 per cent in the quarter and 5.4 per cent over the year (down slightly from 5.5 per cent in the two previous quarters).
The median increase among pay rates which changed in the September quarter - and nearly one in four did - was 4 per cent, unchanged from June.
While such strong wage growth may not be surprising at a time when inflation is at an 18-year high of 5.1 per cent, ASB economist Jane Turner said inflation pressures were subsiding rapidly.
"In particular, the fall in fuel prices over the past few months will put less pressure on employers trying to match the rising cost of living," she said.
Business sentiment surveys find employers scaling back employment intentions and reporting less difficulty in finding labour.
Statistics New Zealand's quarterly employment survey, also released yesterday, recorded 0.6 per cent fewer filled jobs, 0.9 per cent fewer full-time equivalent employees and 0.3 per cent fewer paid hours.
Gross earnings - a proxy for the household sector's labour market income - rose 6.9 per cent in the year ended September, but that was down from 7.4 per cent in the year to June. The September quarter's increase in gross earnings was just 1 per cent.
ANZ National Bank chief economist Cameron Bagrie said that if the peak in wage growth had not already occurred it would be very close.
The Reserve Bank singled out labour costs - along with electricity and local body rates - as concerns two week ago even as it cut the official cash rate by a full percentage point.
The market expects Thursday's unemployment rate reading for September to be 4.3 per cent, up from 3.9 per cent in June.