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Economist at UOB Group Lee Sue Ann gives her views on the recently published report on the labour market in New Zealand.

Key Quotes

“In a mixed bag of labour data… New Zealand’s seasonally adjusted unemployment rate fell to 4.0% in 4Q19, from a revised 4.1% in 3Q19. The rate is now back at its lowest level in a decade, first reached in late-2018. However, employment growth stalled in the quarter, and the labour force participation rate fell to a two-year low as fewer people looked for work.”

“Private sector wages increased 0.6% q/q in 4Q19, with annual growth accelerating to 2.4% y/y.”

“Data released last month showed New Zealand’s consumer prices up 0.5% q/q in the final quarter of 2019. This was slightly higher than expectations for an increase of 0.4% q/q but lower than the 0.7% q/q print in the three months prior. On a yearly basis, inflation surged 1.9% y/y, also above expectations for 1.8% y/y, and much higher from the 1.5% y/y reading in the previous three months.”

We keep to our view that the RBNZ is done cutting for now and will keep the policy rate steady at 1.0%, where it has been since the 50bps ‘double cut’ in August 2019. That said, we remain watchful of both developments at home and abroad. Should employment growth, business investment and household spending weaken further, and/or the global economy deteriorates, we will not be surprised to see the RBNZ venturing into further interest rate cuts and the uncharted territory of unconventional monetary policy, as stated in the post-decision press conference by RBNZ Governor Adrian Orr in November.”