Wages rise as jobless rate at record low, says report

New Zealand's annual wage inflation is thought to have accelerated in the first quarter as a jobless rate close to a record low and rising prices put pressure on employers to pay more to hire and retain workers.

Wages for non-government workers, as measured by the labour cost index, probably increased 3.1 per cent in the 12 months ended March 31 from a 2.9 per cent pace in December, according to the median forecast of 12 economists surveyed by Bloomberg News.

Statistics New Zealand will release the wages data this morning.

Reserve Bank Governor Alan Bollard said late last month there was no scope to cut interest rates from a record high this year because inflation pressures had intensified.

Brendan O'Donovan, chief economist at Westpac, said demand for labour was declining as economic growth slowed, suggesting pressure on wages and prices may ease this year.

"The Reserve Bank is likely to view ongoing wage growth as a reason for maintaining an overly hawkish stance," O'Donovan said.

New Zealand's first-quarter jobless rate was probably 3.7 per cent, according to a Bloomberg News survey of economists.

The employment report is due to be released on Thursday.

The rate was a record 3.6 per cent in the fourth quarter.

Economic growth will probably slow to 0.9 per cent this year from 2.2 per cent in 2005, according to the International Monetary Fund. About 20 per cent of companies expect to shed workers over the next year, according to a survey by the New Zealand Institute of Economic Research published April 11.

Average earnings wages probably gained 0.7 per cent in the first quarter from the previous three months, matching the fourth quarter's increase, according to the economists' survey.