Uncertainty hovers over growth prospects
Unemployment is at the lowest level in five years, but the prospects for growth are looking increasingly uncertain.
Although the number of jobs created in the three months to June 30 was below expectations, unemployment fell by 0.3 per cent, or 9000 people, to 5.6 per cent.
It is the lowest unemployment figure since early 2009, when New Zealand was still in recession.
The news came just 45 days from the September 20 election, and was seized on by the National Party as a sign of a broad-based recovery in the economy.
"Right across the country, the economy's diversified and growing," Prime Minister John Key said yesterday during a visit to Kapiti College.
Economists had expected more jobs to be created than the 10,000 increase in overall employment during the June quarter, but the unemployment rate is the one generally focused on by the public.
The fall in unemployment, to 137,000, was equivalent to one in 16 of those who were unemployed in the March quarter, getting a job.
Lower jobless numbers was a bright note for the Government after a series of announcements that suggested the economy may be stalling.
Early yesterday dairy giant Fonterra announced that the prices in its latest GlobalDairyTrade auction dropped by 8.4 per cent since the previous auction in mid-June, which itself was an 8.9 per cent fall.
Prices in the auction, of New Zealand's largest export product, have plunged 40 per cent since February to a two-year low. The sent the Kiwi dollar to a two-month low against the US dollar.
Key said dairy prices were always volatile and subject to fluctuations, but there was still "tremendous expansion in the sector".
Earlier this week Treasury analysts warned that while growth was expected to remain robust in 2014, there were increased risks to the economy for 2015 and beyond, with falling export prices and lower business confidence.
Yesterday's drop in dairy prices came just weeks after Fonterra slashed its forecast payout for the 2014-15 season to $6 a kilogram of milksolids, from $8.40 this season.
The move would cut the total amount paid to Fonterra's shareholder farmers by more than $4 billion, and Labour said the drop put the economy at risk.
"We're suffering a very sharp decline in export values which will flow through over the next year to two years to the rest of the economy," finance spokesman David Parker said.
He said the target of raising exports to 40 per cent of gross domestic product was already going to be missed before the recent fall in commodity prices.
"The Government's failed to rebalance the economy," Parker said.
"The lack of diversity in our export base is coming home to roost."