NZ jobless rate sparks inflation fears
New Zealand's unemployment rate has fallen from 4.6 per cent an eye-wateringly low 4.0 per cent in the latest labour market survey by Stats NZ.
The 0.6 per cent drop from the March quarter to the June results was hailed by Jacinda Ardern's government of a successful fight against COVID-19.
"This positive result shows the Government's plan is delivering," Finance Minister Grant Robertson said.
The below-predicted result has prompted ANZ New Zealand to forecast the Reserve Bank (RBNZ) to hoist the official cash rate (OCR) later this month.
"Today's data shows we've flown past full employment, and the economy is becoming quite overheated," chief economist Sharon Zollner said.
"The RBNZ needs to hike the OCR promptly to get on top of this. We now expect faster hikes this year," she said, predicting the 0.25 per cent cash rate would go to 1.5 per cent by next year.
In last year's budget, delivered as New Zealand exited its nationwide lockdown, Treasury forecast an unemployment peak of 9.8 per cent due to COVID-19.
Defying fears of a long coronavirus-induced recession, New Zealand's unemployment rate appears to have peaked in September 2020 at just 5.2 per cent.
Mr Robertson pointed to the unemployment rate of Australia (5.2 per cent), the US (5.9), Canada (8.0) and the OECD average (6.6).
"The ongoing impact of the pandemic is likely to see unemployment move around a bit. Nevertheless, New Zealand has performed favourably against the countries we measure ourselves against," Mr Robertson said.
New Zealand's employment rate has also returned to pre-pandemic levels of 67.6 per cent.
Reflecting an economy-wide labour shortage, the underutilisation rate also fell to be 10.5 per cent.
"Spare capacity in the labour market is dwindling, which can potentially result in tighter labour market conditions and lead to upwards pressure on wage rates," Stats NZ spokesman Sean Broughton said.
The labour cost index rose 2.1 per cent in the year to June 2021.
