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Expiries for Mar 02 NY cut 1000ET (Source DTCC)


Budget And Financial Tightening In The Spotlight

By Sophia Rodrigues
     SYDNEY (MNI)  - Following are the main observations we made from the Labour
Market Statistics for the second quarter published by Statistics New Zealand
     --New Zealand's unemployment rate rose slightly in the second quarter but
remained below the Reserve Bank's estimate of non-accelerating inflation rate of
unemployment, indicating monetary policy remains supportive of its goal of
maximizing employment. The data also showed an acceleration in wage growth
mainly due to the impact of rise in minimum wages, and together they support the
RBNZ's on-hold for longer monetary policy stance. 
     --The jobless rate rose to 4.5% from 4.4% mainly due to rise in
participation rate as employment rose more than forecast, up 0.5% q/q compared
with MNI median forecast for 0.4% rise. At 70.9%, participation remains close to
record high of 71.1%. At 4.4%, the jobless rate was lower than RBNZ's estimate
of NAIRU of 4.7%. 
     --Private sector labor cost index rose 0.6% q/q, in line with expectation
and took y/y rise to +2.1%. The rise in labor cost index is likely to help
consumer price index inflation move closer to the RBNZ's 2% target mid-point. 
     --In Q2, the rise in labor cost index was mainly due to increase in minimum
wages and without that, the labor cost index rose just 0.4% q/q and 1.9% y/y.
Apart from minimum wages, the labor cost index received support from wage
settlement for care and support workers last year. Excluding that impact and the
impact of minimum wages, the labor cost index rose just 1.6% y/y. This suggest
there is still lack of broader wage pressures in the economy.
     --An important measure of spare capacity in the economy, the labor
underutilization rate rose to 12.0% from 11.9% in Q1. The rise in
underutilization came from equal contributions from people unemployed and
underemployed. This indicator will be important to watch if the growth momentum
in the economy slows in coming months.
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: