Labour markets in both countries have tightened in recent months. In Australia, the unemployment rate has fallen from a peak of 7.1% to just 6.4% in January. And other measures of spare capacity have tightened even more sharply. The underemployment rate is now below its pre-virus level at 8.1%, on par with the lowest rate since 2014. And job vacancies and surveys on the difficulty of finding labour show businesses are struggling to find staff. Admittedly, the 0.6% q/q jump in wages in Q4 was partly driven by one-off factors but given the tightness in the labour we think wage growth will rise in earnest before long. In New Zealand, the unemployment rate fell in Q4 despite the end of the wage subsidy scheme. Annual wage growth continued to weaken from 1.9% to 1.6% but our expectation of a further tightening in the labour market should support an increase before long. We expect wage growth to rise from 1.4% in Australia and 1.6% in New Zealand in Q4 to around 2.5% in both countries by the end of 2022.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services