Wage inflation has continued to climb - albeit registering a slowing in pace for the quarter to March - but pointing to a year ahead where employees will want to counter the escalating cost of living through with bigger pay packets.
While consumers battle rising food, fuel and mortgage costs, the Reserve Bank is trying to face-down inflation fears by holding interest rates high to quell consumer spending and send inflation back below its preferred 3% maximum.
The labour cost index rose by 0.7% in the quarter to March, lower than expectations, but leaving annual wage growth unchanged for the previous year at 3.5%, data released by Statistics New Zealand said yesterday.
The separate quarterly employment survey (QES) released yesterday showed nominal wages rose 1.5% during the quarter while annual growth was up from 4.2% the previous year, to 4.6%.
ASB chief economist Nick Tuffley said the next two quarters of data were "key" to the Reserve Bank gaining any comfort that wages are contained.
"Although the rationale for asking for wage compensation is perfectly understandable, it nevertheless would risk feeding through to higher costs for businesses, and in turn risks feeding back to higher consumer prices," Mr Tuffley said.
Council of Trade Unions president Helen Kelly said the main reason for recent rises was a reflection of rising costs of living, labour market demand for staff and unions' collective bargaining.
The CTU believed there was room for continued wage rises as the 3.4% wage rise of the past year reflected the same rise in consumer prices.
BNZ economist Mark Walton said regardless of how the wage data was read, growth for the first quarter was "well outside the Reserve Bank's comfort zone".
