Labour market figures came in softer than the Reserve Bank had forecast, but they won’t be enough to move the needle on interest rates, writes Catherine McGregor in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.
Unemployment heading upwards
Unsurprisingly, the latest labour market figures show unemployment is on rise – and by a bit more than the Reserve Bank expected. Unemployment was at 4.3% in the March quarter, up from 4% in the December quarter. The Reserve Bank had forecast a rate of 4.2%. Beyond those topline figures are some interesting statistical nuggets. BNZ economist Stephen Toplis notes one age group that bucked the overall downward trend: in the 35 to 39 age group annual job growth was a remarkable 8.2%. “One can only assume this is a direct reflection of the massive surge in the working age migrant population we have witnessed over the last year or so.” While the rising unemployment numbers represent thousands more New Zealanders thrown into financial precarity, the prospect of lower interest rates is one upside. But don’t get your hopes up, says Kiwibank chief economist Jarrod Kerr. “The data definitely doesn’t require a harsher hawkish tone come May 22,” he said, referring to the date of the Reserve Bank’s next monetary policy statement. “We don’t think there was much in the data that would force the RBNZ to deviate from its stance.”
Tax changes could fuel house price rises, Reserve Bank warns
The other big economic report out on Wednesday was the Reserve Bank’s half-yearly financial stability report (FSR). It noted that cost of living pressures, including higher interest rates, had led to an increase in mortgage arrears, but the rise was relatively small. It said proposed debt-to-income ratios would help shield borrowers, and the wider economy, from risky mortgage lending, but thought changes to the tax treatment of landlords could help fuel the housing market. “Looking ahead, strong population growth, potentially lower mortgage rates and increased investor activity from tax policy changes suggest there is a risk that house prices will rise relative to sustainable levels,” the RBNZ said. Greens co-leader Chlöe Swarbrick said the comments reinforced that “this is terrible policy that funnels money from renters and workers to landlords and speculators… This is a government for landlords, by landlords.”
Businesses are feeling worse and worse
You want even more economic reports? We’ve got ‘em. ANZ’s April business outlook report dropped on Tuesday, and it showed confidence had fallen for the third month in a row, dipping to the lowest level since September, reports The Post’s Tom Pullar-Strecker. The figures suggest the post-election bounce in confidence has been and gone, deflated by “stubborn domestic price pressures, rising oil prices and a more uncertain mood among central banks overseas that the Reserve Bank will start to ease monetary policy this year”. Another report, and this one is good news, says the Herald’s Liam Dann. Stats NZ released its annual research and development survey on Friday, showing that businesses spent 17% more on R&D in 2023 than the year before, potentially prompted by last year’s labour shortages. It was the highest percentage increase since 2018. Still, it wouldn’t be an economic report without some bad news. R&D spend across all sectors, not just business, was around 1.5% of GDP at the end of 2022. That’s a paltry amount, says Dann, and “still well below the target if we want to match other more productive nations”.
Work visa rules breeding resentment
Along with their impact on the broader economy, some migrants are (unwittingly and blamelessly) creating upheaval in their place of work, reports RNZ’s Gill Bonnett. Most workers arriving here on the Accredited Employer Work Visa must receive at least the median wage – about $30 an hour. As a result, they’re often being paid substantially more than colleagues in the same role, which can cause an almighty stink when word gets out. Council of Trade Unions president Richard Wagstaff said unions support the median-wage rule as it prevents employers exploiting migrants as a source of cheap labour. “Where employers are employing local people and they have migrant workers under the scheme, we would expect that they would employ their local people, the domestic labour force, on the same rates.”
Related – Cum chairs, stolen pay and shitting bans: A special May Day round-up of employment horror stories, collated by Hera Lindsay Bird.