Salary and wage rates, including overtime, grew 1.7% in the year to December, well short of inflation at 4%.
Statistics New Zealand (SNZ) released its labour cost index (LCI) yesterday, which showed the rise for the December year was slightly up from the 1.6% in both the September and June years.
Annual wage growth as measured by the LCI declined from a peak of 4% in the year to the September 2008 quarter to 1.5% in the year to the March 2010 quarter.
In the private sector, salary and wage rates rose 1.9% in the year to December, the largest increase since a 2% rise in the year to September 2009.
Public sector rates rose 1.4% in the year to December.
The slight pick-up in growth was because of a higher proportion of wage rates increasing, with the average size of increases staying about the same, SNZ said.
Council of Trade Unions secretary Peter Conway said the main reasons for wage increases cited in the SNZ release were because of the rising cost of living and the incidence of collective bargaining by unions.
"Workers are now facing higher GST, food prices and petrol costs and this will add to pressure for higher wages.
"Low and middle-income workers also missed out on tax cuts of any significance and this unfairness will also affect attitudes to wage bargaining this year," he said.
In the year to December, 53% of salary and ordinary time wage rates in the LCI sample rose, up from 49%, 46%, and 43% in the years to September, June and March 2010 respectively.
In the LCI, salary and wage rates, including overtime, rose 0.5% in the December quarter, the same rise as in the September 2010 quarter.
For the private sector the rise for the latest quarter was 0.6%.
ASB economist Jane Turner said the pace of wage inflation remained modest.
"The annual pace of wage growth continues to run under 2% per annum.
"Firms continue to struggle with weak domestic demand, rising costs and poor profitability.
"In addition, the elevated unemployment rate and limited labour shortages in most industries will likely keep increases muted over the next year."
The Quarterly Employment Survey (QES), also released yesterday, showed a rise of 1.9% in average total hourly earnings for the December year, up from a 1.3% increase in the September 2010 year.
Private sector average total hourly earnings increased 1.8%.
The number of full-time-equivalent employees as measured by the QES rose 0.2% in the December year, and was unchanged for the December quarter over the September quarter.
In the December quarter, seasonally adjusted average total weekly paid hours for full time equivalent employees rose 0.9%.
It was the third consecutive increase and was the largest rise since the December 2004 quarter, SNZ said.
The number of full-time-equivalent employees as measured by the QES rose 0.2% in the December year, and was unchanged for the December quarter over the September quarter.
Ms Turner said labour-demand indicators for the December quarter were very weak, in keeping with recent disappointing data.
The weakness was a result of the patchy economic recovery to date and highlighted the need for interest rates to remain low over much of this year.
Firms remained relatively upbeat over plans to increase employment, adding to her confidence in a recovery in the labour market this year, Ms Turner said.
The LCI tracks nearly 6000 positions and measures changes in pay rates for a fixed quantity and quality of labour.
The QES is designed to measure quarterly estimates of change in, and levels of, average hourly and average weekly pre-tax earnings, average weekly paid hours and the number of filled jobs.
