New Zealand Wages Accelerate as Recession Ends

Nov. 3 (Bloomberg) -- New Zealand wages rose more than economists estimated in the third quarter as the nation emerged from a recession and companies began paying more to attract and retain workers.

Wages for non-government workers, excluding overtime, increased 0.4 percent from the second quarter when they gained 0.3 percent, according to Statistics New Zealand’s labor cost index released in Wellington today. The median estimate of 10 economists surveyed by Bloomberg was for a 0.3 percent gain.

New Zealand’s economy grew for the first time in six quarters in the three months to June, buoying business confidence and encouraging employers to expand production and retain workers. Wages are unlikely to accelerate rapidly because the jobless rate rose to a nine-year high in the second quarter and may increase further.

“We expect wage growth to remain reasonably soft for some time yet,” said Philip Borkin, an economist at ANZ National Bank Ltd. in Wellington. “The labor market remains weak and will continue to act as a drag on households.”

New Zealand’s dollar bought 71.86 U.S. cents at 11:50 a.m. in Wellington from 71.74 cents immediately before the report was released.

From a year earlier, wages rose 1.9 percent. That’s less than the 2.6 percent in the previous three months and was the smallest increase since the year ended June 30, 2001.

Teachers’ Pay

Including overtime, wages for non-government workers rose 0.4 percent from the second quarter when they increased 0.3 percent, today’s report showed. From a year earlier, wages including overtime gained 2 percent.

Wages for government workers rose 1.1 percent in the quarter, led by new pay deals for teachers and health workers.

A separate series based on reported salary and ordinary- time wage rates of non-government workers gained 0.8 percent in the third quarter from the previous three months. From a year earlier, reported wage rates rose 3.7 percent.

Business confidence rose to a 10-year high in September, according to a survey by ANZ National Bank Ltd. Reserve Bank Governor Alan Bollard said last week there are “welcome signs” the economy is growing again. He kept the official cash rate at a record-low 2.5 percent and said he is unlikely to raise borrowing costs until the second half of 2010.

Filling Vacancies

As the economy recovers, filling vacancies isn’t as easy as it was three months earlier. A net 25 percent of companies said it was easier to find skilled workers in the third quarter, down from 42 percent in the second quarter, according to a survey by the New Zealand Institute of Economic Research Inc. Forty eight percent said it was easier to find unskilled employees.

Finance Minister Bill English said on Oct. 13 that signs of improving business confidence haven’t translated into increased jobs. He expects the unemployment rate will rise to about 7 percent by mid-2010, less than the 8 percent peak the government was forecasting earlier in the year.

Fisher & Paykel Appliances Holdings Ltd. returned its Auckland refrigerator plant to 40-hour-a-week production after scaling it back to 35 hours in April. The company took government subsidies to keep the factory operating on reduced hours, saving 60 jobs.

Labor Demand

The jobless rate probably rose to 6.4 percent in the third quarter, the highest level since 2000, according to a Bloomberg survey of seven economists. The government will publish its employment report on Nov. 5 in Wellington.

Average ordinary time hourly earnings for non-government workers rose 1.7 percent in the quarter, the statistics agency said in its quarterly employment survey also published today. Economists expected a 0.5 percent increase.

Companies reduced demand for labor in the quarter, led by manufacturing, according to the survey.

Filled jobs fell 0.8 percent in the quarter and 2.6 percent from a year earlier, the report showed. The number of full-time equivalent employees declined 1 percent. Total paid hours rose 0.2 percent.