Growth fails to show in wages

CECILE MEIER
Last updated 05:00 14/08/2014

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The Christchurch and Canterbury economy continues to perform above national trends, but wages and firm profitability are still lagging behind, the latest Canterbury Development Corporation report shows.

A booming construction sector, with building activity increasing by over 25 per cent in Canterbury over the last quarter, keeps driving Christchurch and Canterbury's economic growth.

The unemployment rate is low and labour participation high in both Canterbury and Christchurch, the report showed.

However, economic growth had not translated into significant workers' salary rises.

Weekly earnings in Canterbury, as measured in the New Zealand Employment and Earnings survey, were up 0.7 per cent in the June quarter compared to the March quarter, at $902 up from $895.

Canterbury's average weekly earnings were still $32 lower than national rates.

CDC chief executive Tom Hooper said he expected workers' wages to increase slowly in the coming months.

"Wages tend to lag growth, so we do expect to see workers' salaries increase, especially with unemployment being so low in the region and also falling nationally."

There was greater competition for skills, which should lead to wage increases throughout the year, he said.

Economic growth did not seem to translate into increased profitability for businesses.

More South Island firms reported decreased profitability than increased over the June quarter, with a net 12 per cent of firms reporting their profitability to have fallen, according to New Zealand Institute of Economic Research data.

This was a further fall from the previous period, and a poorer performance compared to the rest of the country where better and worse performance were closer to balancing out.

Firms were also less optimistic about the three months ahead, with a net 2 per cent expecting their profitability to improve, down from 13 per cent the previous quarter. New Zealand was somewhat more optimistic, with a net 9 per cent expecting a growth in profitability.

Hooper said the statistics could be misleading as some local businesses doing really well were headquartered in Auckland.

He said Canterbury had a lot of small to medium businesses, which tended to have lower than average profitability.

"It doesn't mean they are not doing well, just that they tend to be smaller than the national average," he said.

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