New Zealand wage growth eased from record levels in the fourth quarter as the recession started to hit the labour market, a survey showed on Monday, leaving the way open for more interest rate cuts. The key labour cost index (LCI) of private wages rose 0.7 percent on the previous quarter, for an annual rise of 3.2 percent, against a Reuters poll forecast of a 0.8 percent rise.
The accompanying quarterly employment survey (QES) also showed the first decline in paid hours in nine years and a softening in activity indicators. "It suggests we're set for a very weak household labour force print this Thursday, and that'll keep the rates market looking for more aggressive easing from the RBNZ (Reserve Bank of New Zealand)," said ANZ-National senior economist Khoon Goh. The New Zealand dollar firmed slightly to $0.5080/90, though still close to recent six-year lows, while short-term debt was unmoved.
Last week, the central bank cut interest rates by 150 basis points to a record low 3.5 percent, and said it was ready for further, smaller cuts, if necessary. Since last July it has cut by a total of 475 basis points, to support an economy in recession and being buffeted by global financial turmoil. All 14 economists surveyed by Reuters expect the RBNZ to cut rates by at least another 50 basis points at its March 12 monetary policy statement.
RBNZ governor Alan Bollard said last week the recession would constrain wages, prices and jobs. Statistics New Zealand (SNZ) said the annual rate of wage growth was 3.2 percent, compared with the 3.4 percent forecast by economists. The rise in the LCI was led by higher wages in the health, community group and local government sectors, the government agency said.
The quarterly employment survey showed seasonally adjusted filled jobs edged up 0.4 percent following a 0.6 percent fall in the previous quarter. Total paid hours fell 1.4 percent due to falls in manufacturing, construction and wholesale trade industries, all of which have been hit hard by the recession.