Unemployment rate falls to 23 year low

New Zealand's unemployment rate fell to a seasonally adjusted 3.4 per cent in the September quarter -- the lowest rate in 23 years.

Like the unemployment figure, seasonally adjusted employment growth was far better than economists' forecasts at an annual 3.5 per cent against forecasts of 2.4 per cent.

Even before today's data New Zealand had the lowest unemployment rate in the developed world. Next best is South Korea on 4.1 per cent.

The data means it is almost certain the Reserve Bank will lift interest rates again next month with bank Governor Alan Bollard already struggling to contain inflation running at 3.4 per cent annually.

Statistics New Zealand's Household Labour Force Survey only goes back to March 1986 but New Zealand Institute of Economic Research figures using similar data show the last time unemployment was lower was in September 1982 -- before the Rogernomics reforms begun in 1984 and when the late Sir Robert Muldoon had imposed a wage-price freeze.

The unemployment rate in the June quarter was revised to a seasonally adjusted 3.6 per cent from the original figure of 3.7 per cent.

The number of people unemployed fell 6 per cent in the quarter to 73,000.

Quarterly employment growth was 1.3 per cent, well above economists' estimates of 0.4 per cent, and the highest growth in five years.

Of the 26,000 new jobs created in the quarter, 22,000 were full-time.

The participation rate rose to a record high of 68.2 per cent from 67.7 per cent in the June quarter.

SNZ said employment growth was driven by growth in full-time employment, which was marginally stronger amongst the male population. Male unemployment is the lowest since September 1986.

Over the year there were a net 72,000 new jobs created.

The total labour force grew by 1 per cent over the quarter with 2,093,000 in jobs.

"The labour market remains tight in the September 2005 quarter, with slowing working-age population growth and stronger growth in employment than in the total labour force," acting government statistician Geoff Bascand said.

The pakeha unemployment rate fell to 2.2 per cent from 2.5 per cent in the June quarter while the Maori rate actually rose to 9.1 per cent from 8.6 per cent. The Pacific peoples rate fell to 5 per cent from 6 per cent.

The drop in unemployment was driven by the Auckland and Wellington economies. The Auckland rate fell to a record low of 2.8 per cent from 3.4 per cent while in the Wellington rate fell to 2.8 per cent from 4.1.

There was a sharp drop in unemployment in Northland -- to 4.9 per cent from 6.8 per cent, but other regions experienced a lift in their rates.

Bay of Plenty was up to 3.8 per cent from 3.1, Gisborne/Hawke's Bay jumped to 6 per cent from 4.7, Taranaki up to 3.6 per cent from 2.7, Manawatu-Wanganui up to 4.7 per cent from 4.0, Tasman-Nelson/Marlborough/West Coast to 2.9 per cent from 2.3 and Canterbury to 2.7 per cent from 2.5.

Southland had the lowest unemployment rate at 1.9 per cent from 2.3 per cent.

The New Zealand dollar rose on the back of the news, to US68.73c from US68.50c at the 8.30am open of the local foreign exchange session.

ASB Bank economist Anthony Byett said that with labour cost data earlier in the week showing much higher costs than forecast, there was likely to be more than one more interest rate hike.

"It just confirms that we've had a solid quarter, the capacity in our economy is very tight and we have inflation over 3 per cent and this is not going to go away quickly.

"It just confirms in my mind that the Reserve Bank will be going (hiking rates) twice more, in December and January," he said.

The Reserve Bank has hiked interest rates eight times since the start of last year and New Zealand already has the highest rates in the developed world.

- NZPA