Last week was a massive one for New Zealand economic news. The US-China trade war entered a troubling new phase, the local jobs market defied expectations of a slowdown, and the Reserve Bank delivered a surprisingly large interest rate cut.

The week kicked off with China retaliating to the latest US tariff move in a range of ways, including a devaluation of its currency. It is becoming clearer that the trade wars are going to impact Chinese demand for New Zealand products. We were not surprised, then, to see a decline in dairy prices in last week's GlobalDairyTrade auction. We have now reduced our forecast of this season's farmgate milk price payment to $6.70/kg milk solids, on the expectation that Chinese demand for milk will falter. At the start of the year our forecast was $7.20/kg, so we've gone from expecting a strong dairy season to an average one. The other key area of fallout is going to be export log prices, which already fell 25% in June. We anticipate further price decline given what is happening in China.

The second key development was a surprise drop in the unemployment rate to an eleven-year low of 3.9%. That's tight, but not extreme by New Zealand standards – unemployment got into the low 3s in the mid-2000s. This was no data aberration – Stats NZ's suite of labour market indicators was strong almost across the board. Employment growth was a healthy 0.8% according to the Household Labour Force Survey, and the Quarterly Employment Survey (QES) was similarly robust.

Wage growth clearly accelerated on all measures, with the Labour Cost Index registering 0.7% quarterly and 2.1% annual growth, the fastest since the GFC. Much of that was a product of the 7.3% increase in the minimum wage, but not all. We are finally seeing signs that wage inflation more generally is warming, albeit gradually.

Download The Full Weekly Commentary

All information contained on this website is given in good faith and has been derived from sources believed to be accurate. However, the information is selective and neither Westpac nor any other company in the Westpac Group have verified the information, which may not be complete or accurate for your purposes. Those companies make no representation or warranty of any kind as to the accuracy or completeness of the information. It is general information only and should not be considered as a comprehensive statement on any matter and should not be relied upon as such. Neither Westpac nor any other company in the Westpac Group nor any of their directors, employees and associates guarantees the security of this website, gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way including by reason of negligence for, errors in, or omissions from, the information on this website and does not accept any liability for any loss or damage, however caused, as a result of any person relying on any information on the website or being unable to access this website. This disclaimer is subject to any applicable contrary provisions of the Australian Securities and Investments Commission Act and Trade Practices Act.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex Analysis

Editors’ Picks

EUR/USD surges above 1.13 after ECB's stimulus boost

EUR/USD is trading above 1.13, the highest since mid-March. The ECB added €600 billion in fresh stimulus, more than expected. The bank's move joins German stimulus and hopes for a recovery. 

EUR/USD News

GBP/USD avances toward 1.26 amid improving mood

GBP/USD trades closer to 1.26, buoyed by USD dollar weakness stemming from a better market mood. US jobless claims have marginally disappointed yet other US figures are more upbeat. Markets are shrugging off concerns about a no-trade-deal Brexit.

GBP/USD News

Will race relations rock markets? election campaign, coronavirus, crippled economy all in the mix

America is divided by demonstrations against racial discrimination that come on the backdrop of the coronavirus epidemic and attempts for a recovery. Will this or something else eventually affect markets? Valeria Bednarik, Joseph Trevisani, and Yohay Elam have a lively discussion about all these topics.

Read more

Gold recovers further from 1-month lows, moves back above $1715 level

Gold added to its intraday gains and refreshed daily tops, around the $1718 region during the early North American session.

Gold News

WTI: Recovery remains capped below $37 mark amid OPEC+ uncertainty

WTI (July futures on Nymex) is ranging in the familiar trading band near mid-36s so far this Thursday, having failed yet another upside attempts just shy of the 37 mark.

Oil News

Forex Majors

Cryptocurrencies

Signatures