Satish Ranchhod, Senior Economist at Westpac, explains that although the NZ’s labour market has been strengthening, wage inflation remains low and they’re expecting the March quarter Labour Cost Index will show that base wage rates rose by only 1.6% over the past year.
Key Quotes
“Similarly, the broader QES measures of average hourly earnings is expected to have risen by only 1.4%.”
“The low wage inflation we’ve seen in recent years has come against a backdrop of more general softness in consumer prices. This meant that even though nominal earnings growth was limited, households’ purchasing power was continuing to expand at a healthy pace.”
“However, the inflation backdrop has changed dramatically in early-2017. Consumer price inflation rebounded to 2.2%, and we expect that it will linger around 2% over the coming year. This signals increasing pressure on household purchasing power.”
“Combined with firmness in domestic activity, the rise in consumer price inflation is expected to see wage growth picking up (especially with businesses highlighting increased difficult sourcing both skilled and unskilled labour). Nevertheless, wages are still expected to rise fairly gradually.”
“From August, the overall level of wage inflation in the economy will receive a sizeable boost from the recent equal pay settlement for caregivers. This historic agreement will boost the wages of around 55,000 workers from August by a sizeable amount. It’s likely that we’ll also see some spill over to wage and salary rates in associated occupations. However, outside of specific occupations, we still expect that overall wage growth in the economy will be modest. In particular, private sector wage growth is expected to linger below 2% for most of the next two years even as consumer price inflation rises.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.0700 ahead of key US data
EUR/USD trades in a tight range above 1.0700 in the early European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays above 156.00 after BoJ Governor Ueda's comments
USD/JPY holds above 156.00 after surging above this level with the initial reaction to the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Sei Price Prediction: SEI is in the zone of interest after a 10% leap
Sei price has been in recovery mode for almost ten days now, following a fall of almost 65% beginning in mid-March. While the SEI bulls continue to show strength, the uptrend could prove premature as massive bearish sentiment hovers above the altcoin’s price.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.