- New Zealand's unemployment rate fell more than expected in the second quarter as the economy recovered and began to stoke wage inflation. The kiwi dollar rose as traders increased bets on higher interest rates.
The jobless rate fell to 4% from a revised 4.6% in the first quarter, Statistics New Zealand said Wednesday in Wellington. Economists expected 4.4%. Employment rose 1% over the last three months. The average sector, private sector wages and salaries doubled in 13 years.
The labor market report is the latest sign that the economy may be overheating, and that the Reserve Bank could start to raise interest rates as soon as this month to keep a lid on price pressures. Annual inflation swelled in the second quarter to 3.3%, breaching the target range of the central bank on 1 - 3%.
The kiwi dollar for the latest report increased after the report was released. It bought 70.43 U.S. cents immediately in Wellington at 10: 54 a.m. to purchase 70.24 cents immediately before the release.
Investors lifted bets on rate increases, with a quarter-point hike 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 available (Finally)
The RBNZ, able to support stable inflation as well as maxim employment, began reducing monetary stimulus last month by discontinuing quantitative easing, saying economic conditions since late 2020 had been consistently stronger than anticipated.
Yesterday Governor Adrian Orr declared that economic spending has recovered to above pre-Covid levels and the monetary policy committee "needs to think about when and how we would return interest rates back to normal levels".
New Zealand is in the vanguard of developed-world central banks that are beginning to normalize policy and is set to be one of the first to raise rates after the pandemic. Earlier this year, South Korea had signaled it will raise borrowing costs. Still, the Federal Reserve indicated there is some way to go before it starts to scale back bond buying, while Australia said yesterday it doesn't expect to raise rates before 2024.
The confidence in New Zealand business rebounded in late 2020 after a V-shaped recovery boosted by the nation's success in eliminating community transmission of the virus. The unemployment rate never hit the highs feared when pandemic first hit.
New Zealand employment rose for a third straight quarter after losing mid-2020 and also gained 1.7% from a year earlier. Economists had forecast 1.2% annual growth. Participation rate increased to 70.5% from 70.4% in the three months between March and September. Economists projected 70.5%.
Statistics New Zealand said the underutilization rate, which is a broader gauge which includes employed persons seeking additional hours, fell to 10.5% from 12.1% in the first quarter of 2016.
Ordinary wage earnings for non-government workers rose 0.9% in the quarter, the highest since 2008, data obtained from Statistique Canada said. From a year earlier, wage growth shot up to 2.2% from 1.6% in the 12 months until March.