The central bank may be hesitant about decreasing interest rates after New Zealand unemployment climbed less than projected last year.
Statistics New Zealand in Wellington reported a 4% fourth-quarter unemployment rate, up from 3.9% in the third. Economists predicted 4.3%.
Employment rose 0.4% from the previous three months, exceeding expectations of 0.3%, although wage inflation fell.
As a record number of immigrants enter the labour market, earnings fall and high borrowing rates restrict household expenditure.
Even though investors expect the Reserve Bank of New Zealand to lower rates later this year, policymakers stressed they still need to control inflation.
Jarrod Kerr, Kiwibank’s Auckland chief economist, said the report today diminishes the RBNZ’s likelihood of a near-term rate cut.
“May and August cuts may wait until November. Our November cutting call continues.”
In November, the RBNZ hinted about raising the cash rate from 5.5% in 2024 and not decreasing it until 2025.
Since then, changes to the figures have shown that the economy had been weaker than expected in 2023. This has led to more talk of a rate cut in Q2.
Paul Conway, the chief economist at RBNZ, stated last month that there is still “a way to go” before the bank can bring inflation back to its target range of 1% to 3%.
Headline inflation in Q4 came in at 4.7%, below the RBNZ’s forecast of 5% However, inflation for non-tradables was not going down.
Government worker pay went up 3.9% from a year ago, according to the statistics office. This is less than the 4.1% increase seen in the quarter before that.
Following compensation settlements with nurses and teachers earlier in the year, central government sector ordinary time wages grew 5.7% annually, up from 5.5% in the previous quarter.
Ordinary non-government worker hourly salaries climbed 0.5% from the previous quarter and 6.6% from a year earlier.
This is lower than the record 8.6% yearly rate set in Q3 2022.
The 2.4% annual increase in employment above the 2.1% forecast made by economists, albeit it decreased from 2.7% in the prior quarter. 72% of participants decreased to 71.9%.
