KEY POINTS:
Wage inflation retreated slightly during the March quarter but remains high, and economists are warning labour costs may pick up again in coming months.
Statistics NZ's labour cost index (LCI) showed salary and wage rates across the private and public sectors, and including overtime, increased 0.6 per cent in the three months to March, taking the annual rate to 3.1 per cent, down from the 3.2 per cent maintained over the previous three quarters.
Private sector wages and salaries, including overtime, which is the Reserve Bank's preferred measure of wage inflation, rose 0.6 per cent in the March quarter against 0.9 per cent during the three months to December.
The rise, against economists' expectations of a 0.8 per cent increase, reduced the annual rate to 3 per cent from 3.1 per cent.
As it has done for some time, wage growth in the public sector continued to outpace the private sector, with central Government salaries rising 3.8 per cent over the March year.
The LCI tries to measure changes in pay rates for the same quantity and quality of work. It excludes promotions, service increments, bonuses or other recognition of increased productivity. The unadjusted measure, which leaves those in, gives a better picture of what is happening to overall payroll costs. It rose 0.8 per cent in the three months to March against 1.3 per cent the preceding quarter and 4.5 per cent over the March year against 4.9 per cent for the December year.
Meanwhile, another Statistics NZ labour market indicator, the quarterly employment survey, also softened somewhat from strong levels.
Total gross earnings rose 0.6 per cent over the quarter, seasonally adjusted, and 6.8 per cent for the year, down from 8.9 per cent during the December year.
ANZ economists said the slightly softer numbers did not indicate wage inflation had now peaked.
They said there appeared to be some seasonal factors at work, the overall numbers remained high and further wage increases were expected.
The new minimum wage, which came into effect on April 1, as well as employees seeking to raise their pay to keep pace with inflation, would add upward pressure to wages in the June quarter.
"In addition, the labour market remains tight and a rebound in employment intentions suggest there is still an appetite to hire," ANZ said.
The relatively stronger growth in the public sector had potential to "spill over" in to the private sector.
The data would provide "some comfort" to the Reserve Bank, but it would remain vigilant for any signs the high level of wage inflation was finding its way into consumer prices.
