New Zealand Wages Rise 3.5% as Fuel, Food Costs Soar

By Tracy Withers

Nov. 3 (Bloomberg) -- New Zealand wages rose at a record pace in the year ended Sept. 30 as workers demanded pay increases to meet rising food and fuel costs.

Wages for non-government workers, excluding overtime, increased 3.5 percent in the 12 months to September, according to Statistics New Zealand's labor cost index released in Wellington today. Wages rose 1.2 percent from the second quarter.

About 43 percent of companies surveyed said they increased wages because of a higher cost of living as fuel and food costs soared. Annual wage inflation may slow as consumer spending and business investment decline after the economy fell into its first recession since 1998.

``Wage inflation is close to peaking and will ease off in coming quarters because the labor market has turned,'' said Khoon Goh, senior economist at ANZ National Bank Ltd. in Wellington.

``Wage inflation at this rate will still continue to give the Reserve Bank some concern on the inflation front, but not enough to cause them to back off on further easing.''

New Zealand's dollar bought 58.53 U.S. cents at 11:35 a.m. in Wellington from 58.47 cents immediately before the report.

The median estimate of 11 economists surveyed by Bloomberg News was for wages to rise 0.8 percent in the quarter and 3.4 percent from a year earlier. Wages also rose 3.5 percent in the year to June.

Mining, Farming

The agriculture and mining industries posted record quarterly increases, the statistics agency said. Both sectors said the main reason was to reflect the higher cost of living.

Including overtime, wages for non-government workers rose 1.1 percent from the second quarter, for a record annual increase of 3.7 percent, today's report showed.

The economy contracted in the first half of this year and probably shrank in the third quarter, the central bank and Treasury Department said in September.

Reserve Bank Governor Alan Bollard has reduced the benchmark interest rate by 1.75 percentage points to 6.5 percent since July and will probably cut another half point in early December, according to eight of 10 economists surveyed by Bloomberg.

Unemployment Rising

Wages may slow as unemployment rises, increasing the supply of workers. Company hiring intentions slumped to a 20- year low in October, according to a survey by ANZ National.

Business confidence fell by the most on record as an inability to obtain credit made firms unwilling to hire workers or start new projects.

The jobless rate probably rose to 4.3 percent in the third quarter, the highest since 2003, according to a survey of 12 economists. The employment report is published on Nov. 6.

A separate series based on reported salary and ordinary- time wage rates of non-government workers rose 1.5 percent in the third quarter and 5.4 percent from a year earlier, Statistics New Zealand said.

Average hourly ordinary time wages of non-government workers climbed 1.1 percent in the quarter for an annual gain of 5.2 percent.

Statistics New Zealand also released indicators showing the demand for labor slowed in the third quarter.

The number of full-time equivalent employees declined 0.9 percent from the second quarter. The number of total filled jobs fell 0.6 percent.

Total paid hours dropped 0.3 percent, seasonally adjusted, from the second quarter.

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