New Zealand Annual Wages Rise Less-Than-Expected 3.5%

By Tracy Withers

Aug. 4 (Bloomberg) -- New Zealand wages rose less than economists forecast in the year ended June 30, adding to signs that companies are resisting union demands for pay increases.

Wages for non-government workers, excluding overtime, increased 3.5 percent in the 12 months to June, according to Statistics New Zealand's labor cost index released in Wellington today. Wages rose 0.8 percent from the first quarter.

New Zealand's economy stalled in the first half of 2008, reducing profits and making companies less willing to meet wage demands from workers who face soaring food and fuel costs. Reserve Bank Governor Alan Bollard said last month he expects wage growth will slow from next year, combating inflation.

``Firms are struggling to deal with rising costs and slowing demand, with falling profitability likely to keep a cap on wage growth,'' said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland. ``The Reserve Bank is betting on lower demand keeping wage pressures in check.''

Annual wage inflation matched the previous two quarters, which is the fastest pace since the series began in the fourth quarter of 1992. Economists expected 3.6 percent, according to the median estimate of 11 economists surveyed by Bloomberg News.

New Zealand's dollar bought 72.83 U.S. cents at 12:05 p.m. in Wellington from 72.79 cents before the report.

Union Demands

The economy contracted in the first quarter and eight of 13 economists forecast it also shrank in the three months to June, putting New Zealand in its first recession since 1998.

Bollard cut the benchmark interest rate a quarter point to 8 percent on July 24, the first reduction in five years, saying slowing economic growth will ease inflation to less than 3 percent by mid-2010.

New Zealand's biggest union said this month it will seek higher wages for its 50,000 members after a report showed gasoline prices rose 13 percent in the second quarter.

``Every time our members fill up their cars or fill their supermarket trolleys, they're feeling the pinch and the only answer to that is to ensure that they're getting high enough wages to keep ahead of the game,'' said Andrew Little, national secretary of the Engineering, Printing and Manufacturing Union.

Forty three percent of employers cited the need to match increases in the cost of living as reasons to increase wages, the statistics agency said today. Thirty percent cited the need to match market rates.

Overtime Rates

Including overtime, wages for non-government workers rose 0.8 percent from the first quarter, for an annual increase of 3.4 percent, today's report showed.

A separate series based on reported salary and ordinary- time wage rates of non-government workers rose 1.2 percent in the second quarter and 5.5 percent from a year earlier, Statistics New Zealand said.

A separate report today showed average hourly ordinary time wages of non-government workers climbed 2 percent in the second quarter for an annual gain of 5.4 percent.

Statistics New Zealand also released indicators showing the demand for labor rose in the second quarter after an unexpected slump in the first three months of the year.

The number of full-time equivalent employees gained 0.8 percent from the first quarter when it fell 1 percent. The number of total filled jobs increased 1.7 percent after dropping g 2.3 percent in the first quarter.

Total paid hours rose 0.5 percent, seasonally adjusted, from the first quarter, the statistics agency said.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.