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Confidence up, wage expectations still low

NZ Newswire logoNZ Newswire 25/09/2016 Sophie Boot

New Zealanders grew more optimistic about employment prospects in the September quarter with confidence lifting across age groups, regions and income categories, although workers weren't so upbeat about wages growth.

The Westpac-McDermott Miller Employment Confidence Index rose 8.5 points to 110.1 in the quarter, the highest level since September 2014.

A reading above 100 indicates optimists outnumber pessimists. The present conditions index gained 9.2 points to 106.8 while the employment expectations index advanced 8.1 points to 112.2.

New Zealand's labour market has been improving this year as booming construction and tourism sectors underpin economic activity, while record net inflows of migrants have buoyed consumer demand.

That expansion has created new jobs, though the growing population has led to a larger workforce, keeping wages static.

Earning expectations rose slightly, with 24.9 per cent of the 1559 workers surveyed expecting a pay rise in the next 12 months, up 0.5 percentage points from the June quarter. A net 26 per cent of respondents were paid more now than they were a year earlier, up 2.4 percentage points.

"Despite the small improvement, earnings expectations over the next 12 months continue to linger well below average levels and are only a touch above the all-time low reached late last year," Westpac senior economist Anne Boniface said in her report.

The lack of wage growth was due to a combination of very low inflation, now at just 0.4 per cent, strong labour force participation and net migration-driven population growth, Boniface said.

"This will continue to provide a headache for the RBNZ as it looks to generate more inflation pressure in the economy," she said.

"However, with signs that net migration may be nearing a cyclical peak, inflation projected to pick up next year, and the labour market continuing to tighten, it seems it will only be a matter of time before workers become more optimistic about their future earnings prospects."

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