WELLINGTON: New Zealand’s unemployment rate was expected to have hit a nine-year low in the third quarter, though the rosy outlook was unlikely to prompt the central bank to re-think its determination to keep interest rates on hold for years. Ten economists polled by Reuters on average forecast the unemployment rate to sink to 4.7 percent, its lowest since 2008, when figures are released on Wednesday. It was 4.8 percent in the previous quarter. Wage growth was set to rise to a three-year high of 1.9 percent, according to analysts’ forecasts, on the back of a government regulation to increase pay for care and support workers. But economists cautioned that upbeat readings were unlikely to alter the Reserve Bank of New Zealand (RBNZ) from its signals it would keep rates on hold at a record low of 1.75 percent, possibly until 2020, to boost inflation. “With the RBNZ firmly on hold and a strong one-off element to the quarterly wage lift, we do not see…(the) labour data as having strong implications for the RBNZ’s current deliberations,” said Sharon Zollner, senior economist at ANZ. The bank’s next policy rate review is on Nov. 9.
But as the centre-left Labour Party took the helm after a decade of right-wing National Party government, employment data was poised to get more attention in the coming year. “The employment statistics will come under further scrutiny over the next few months, with the Labour-NZ First Government set to introduce an employment target into the Reserve Bank of New Zealand’s objectives,” said ASB economist Jane Turner. Labour has not confirmed exactly how it will adjust the RBNZ’s mandate, but could change the agreement when a new governor starts in March or the legislation governing the RBNZ to increase its focus on employment alongside inflation. With unemployment already at low levels, economists did not expect the changes to alter much in the short term, but it would reinforce the RBNZ’s stance of keeping rates on hold for a long period. The expected drop in unemployment in the three months to the end of September was likely due to labour shortages that prompted employers to snap up any skilled workers they could find, according to analysts. But longer term economists said headwinds to growth could see unemployment sneak back up. “We have become a little more circumspect on the near-term growth outlook as the economy grapples with headwinds from a weaker housing market and policy uncertainty,” ANZ’s Zollner said.
