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NZ: Subdued wage inflation on the cards – Westpac

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 3, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) - Imre Speizer, Senior Markets Strategist at Westpac, suggests that the release of NZ September quarter labour market data on Wednesday should underscore two important developments in the economy in recent times – the consequences of strong population growth and muted inflation.

    Key Quotes

    “Strong population growth has boosted participation in the labour market. The participation rate is expected to increase again in the September quarter to reach 69.4%, which is just shy of the record high we saw earlier in the year. Against this backdrop, more modest growth in employment will see the unemployment rate rise back above 6% (we’re forecasting 6.2%). And with plenty of people joining the labour market, there remains little pressure on employers to raise wages.”

    “By early next year, evidence that inflation will be lower for longer should be mounting, compelling the RBNZ to cut the OCR twice more in March and June to 2.0%. NZ’s short term economic momentum fell sharply from a neutral state last week, following declines in CPI, the trade balance, credit card spending and building permits. Given the relationship between the data pulse and the NZD, we should at least note the warning, while recognising that the relationship has broken at times.”
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