New Zealand unemployment rate falls to 4. 6% in second quarter
- The unemployment rate of New Zealand was lower than forecast in the second quarter as the economy's recovery boosted hiring and began to stoke wage inflation. The kiwi dollar rose as traders bet increased interest rates could be opened as soon as two weeks' time.
The unemployment rate fell to 4% from a revised 4.6% in the first quarter, Statistics New Zealand said Wednesday in Wellington. Economists had expected 4.4%. Employment rose 1% from the last three months. Private sector wages, ordinary time wages increased the most in 13 years.
In the second quarter, annual inflation was risen to 3.3%, breaching the target range of the central bank by 1 - 3%.
'Today's figures indicate that the domestic economy is running hot and not now warrants the degree of monetary stimulus that's currently in place, said Michael Gordon, acting New Zealand chief economist at Westpac Banking Corp. in Auckland. The report strengthens our forecast for an OCR hike on August 16th, he said.
The kiwi dollar climbed after the report. It bought 70.49 U.S. cents at 11: 20 a.m. in Wellington from 70.24 cents immediately prior to the release.
Investors lifted bets on rate increases, with a quarter-point hike expected now fully priced in for the RBNZ's next review on Aug. 18 and at least one more expected by the end of the year. Economists at ASB Bank and the Bank of New Zealand said they now expect three rate rises this year, taking the cash rate to 1%.
'The data show that the RBNZ is well behind the curve. Things are only getting tighter, said Stephen Toplis, head of research at BNZ in Wellington. The RBNZ, which was required to support high employment as well as stable inflation, began reducing monetary stimulus last month by ending quantitative easing, saying economic conditions since late 2020 had consistently been stronger than anticipated.
Yesterday Governor Adrian Orr said that spending has returned to above pre-Covid levels and the monetary policy committee 'needs to think about when and how we would return interest rates to more normal levels.
New Zealand is in the vanguard of developed-world central banks that are beginning to normalize policy and is likely to become one of the first to raise rates in the wake of the pandemic. South Korea also said that it could lift borrowing costs this year.
Still, it noted on Tuesday that some ways to go before it starts to scale back bond buying, while Australia said yesterday it doesn't expect to raise rates before 2024.
Employment rose for a third straight quarter after slumping in mid- 2020 and also gained 1.7% from a year earlier. In the economics department, economists had forecast 1.2% annual growth. In the three months to March, participation rate increased from 70.4% to 70.5%. The economists projected 70.5%.
Statistics New Zealand said the underutilization rate, which is a broader gauge that includes employed persons seeking additional hours, fell from 12.1% in the first quarter to 10.5%