KEY POINTS:
There are tentative signs that wage inflation has peaked, though it remains strong.
Statistics New Zealand's June labour cost index shows quarterly increases in ordinary time wages and salaries for the private sector (0.7 per cent) and for public and private sectors combined (0.6 per cent) were unchanged from March but down on the second half of last year.
Among the pay rates which increased during the quarter, both the average (5.5 per cent) and the median (4.1 per cent) annual increases were unchanged from March and marginally lower than in the second half of last year, although still high by the standards of the past 10 years.
But other indicators pointed to continued upward pressure.
The Reserve Bank's preferred measure of wage inflation, which includes overtime, increased 0.8 per cent in the quarter, making 3.2 per cent for the year. That is the highest annual rise in the history of the labour cost index and an increase on March's 3 per cent. The bank expects that measure to decline towards 2.7 over the year ahead.
Another measure which is deteriorating is the proportion of pay rates increasing by more than 3 per cent. It has climbed steadily from 43 per cent in the last September quarter to 46 per cent in the latest period.
"The labour market remains extremely tight, with firms continuing to report difficulty in finding both skilled and unskilled workers," said ANZ National bank chief economist Cameron Bagrie.
It was mildly encouraging that wage inflation had not accelerated in the June quarter, particularly as an increase in the minimum wage came into force on April 1. But wage inflation was likely to remain at those levels for some time, he said.
Unusually, public sector wages grew more slowly than private sector rates.
Wages in the finance and insurance sector rose 5.2 per cent, the largest increase for six years. Manufacturing wages roses 3.6 per cent, also the largest in six years, while in the retail sector they increased 2.8 per cent.
Another set of labour market statistics, the quarterly employment survey, recorded a 7 per cent annual increase in gross earnings - a measure of labour market income for the household sector as a whole - up from 6.7 per cent for the year ended March. The increase reflected more people employed (2.7 per cent ahead of a year ago), working longer hours (up 2.7 per cent) and for higher wages (up 4.2 per cent).
Deutsche Bank chief economist Darren Gibbs said there was nothing in the reports to make the Reserve Bank feel uncomfortable with having lifted the official cash rate four times since March.
"But neither do the reports indicate that further action is warranted."
Instead the bank would look at data on housing activity, retail spending and confidence for signs activity would fall to below-average levels.
MORE IN THE POCKET
* Private sector pay rates including overtime rose 0.8 per cent in the June quarter, to be 3.2 per cent higher than a year ago.
* Ordinary time rates rose 0.7 per cent for the quarter and 3.1 per cent for the year.
* The unadjusted increase (which includes pay rises for individual merit or seniority as well as the going rate for the job) was 1 per cent for the quarter and 4.6 per cent for the year.
