Employers having to pay more

Wage inflation probably accelerated in the second quarter as a 19-year-low jobless rate put pressure on employers to pay more to hire and retain skilled workers.
Wages for non-government workers, as measured by the labour cost index, probably increased 0.7 per cent in the three months ended June 30, a median forecast of 10 economists says. Wages rose 0.6 per cent in the first quarter.

Reserve Bank Governor Alan Bollard, who has raised interest rates seven times since January 2004, said last week there was no prospect of an early rate cut because of the risk posed by inflation.

Economist Craig Ebert, of the Bank of New Zealand, said rising labour costs could fan inflation and would prevent interest rates falling until mid-2006.

From a year earlier, wages probably gained 2.6 per cent. That is the fastest annual pace since the series began in 1993. A separate measure of wage inflation, average ordinary time hourly earnings for non-government workers, probably rose 1.4 per cent in the second quarter.

From a year earlier, earnings probably rose 1.6 per cent.

The economists also predict that the jobless rate was probably unchanged at 3.9 per cent in the second quarter.

- Bloomberg