Wages set to fall

BY PAUL MCBETH
Last updated 10:58 23/03/2010

Relevant offers

Money

NZ Mint seals $60m export deal to China Ticks, stars and 'no's: What do food labels mean? Use crowd power for better electricity deal Expensive meal plans not needed for weight loss: Nutritionist The expensive mistakes made by NZ's amateur landlords We love Kiwi-owned banks, Consumer NZ survey shows How to put a financial windfall to good use Do you want to know where your food comes from? Budget Buster: Don't miss out on your free Government cash Want to live til you're 90? Better live like a life insurer

Real wages are set to fall over the coming year as rising prices and extended unemployment keep the labour market subdued, economists say.  

The value of wages will decline 0.5 per cent  in the 12 months through March 2011 as inflation exceeds salary growth, while unemployment remains elevated, according to the New Zealand Institute of Economic Research’s consensus forecast of ten financial and economic agencies.  Wages are expected to grow 1.9 per cent  this year, down from 2.2 per cent  in the previous survey, and lagging behind the expected inflation 2.4 per cent  for the same period, up from a forecast 2.1 per cent  in the December survey.

“Real wages are likely to decline to March 2011 and remain flat through March 2012, which may dampen a recovery in household spending,” said economist Peter O’Connor in his report. “A subdued economic recovery means the unemployment rate is expected to remain elevated in the forecast horizon.”

Unemployment hit a 17-year high 168,000 at the end of last year, sapping optimism over New Zealand’s economic recovery as it climbed out of the worst recession since the 1990s. 

The economists predict the annual unemployment rate will peak at 7.2 per cent  in the year through March 2010, up from 7 per cent  in the previous survey, before gradually declining to 6.2 per cent  by 2012.

O’Connor said this was still higher than the “sub 4 per cent  levels through much of 2005 to 2008” and would probably cap wage growth. 

Still, the survey was slightly more bullish about the economy’s prospects, with the outlook for annual gross domestic product growth up to 3.1 per cent  from last survey’s 2.8 per cent  for the 12 months through March next year.

The forecast for the year ended March this year remained unchanged at a 0.4 per cent  annual contraction. 

New Zealand’s GDP probably grew 0.8 per cent  in the three months ended December 31 when data is released on Thursday, according to a Reuters survey. 

Ad Feedback

- BusinessDesk

Special offers

Featured Promotions

Sponsored Content