Wage claims are likely to become a major issue for 2008 despite the economic downturn, according to unions and economists who are predicting wage growth beyond 4%.
The country's largest union, the Engineering, Printing and Manufacturing Union (EPMU), and the Council of Trade Unions (CTU) believe continuing tight labour conditions and inflation will prompt wage claims during the year above 4%.
Neither the EPMU nor CTU wanted to comment directly on the prospect of industrial action in the year ahead, but both pointed to a slew of economic data underpinning inflation and productivity expectations, and wage claims to date.
Inflation appears to be the crucial sticking point in wage bargaining positions.
It is already beyond the Reserve Bank's target outer 3% range and the key driver of the central bank holding New Zealand's interest-driving official cash rate at the highest in the developed world, 8.25%.
Wage data for the quarter to March this year, to be released today, is expected to reflect the more buoyant 2007 period, as opposed to the economic downturn experienced during the first quarter of this year.
Westpac chief economist Brendan O'Donovan said the wage data was a "notorious lagging indicator".
However, while wages had been increasing during the past two years, they were set to rise even more rapidly during the next 12 months.
"As there is no prospect of a let-up in inflation, there will be no let-up in wage pressure.
This could be the beginning of a miniature wage-price spiral," Mr O'Donovan said.
During the past year, businesses have tightened their belts, - for some to the last notch - in the face of increasing wage demands, compliance costs, more expensive interest rates and skyrocketing competition, fuel and transport costs.
The situation is further compounded for many by the overvalued New Zealand dollar.
Similarly, households are facing a range of increasing costs from fuel, up more than 50%, staple food items up by as much as 30% and mortgage costs rocketing from 7%-8% to be reset for between 9%-11%.
EPMU national secretary Andrew Little said average settlements in past months were around 4%-4.2%, and stalled talks in another settlement recently sat at 3.9%, but were completed at 4.5%.
"There is an employer expectation out there that they will need to go above the 4.2% range for settlements," Mr Little said. However, he acknowledged that with both households and businesses under increasing cost pressures, there was a "state of great flux" and predicted "tougher bargaining by both sides" during the year ahead.
CTU economist Peter Conway said the adjusted labour cost index was between 3.2%-3.3%, unadjusted had fallen from 5.7% to 5%, while median expectations were 4% and average expectations 5%.
"I don't anticipate there will be much change in the year ahead to these type of figures," Mr Conway said.
Households had increased their spending through cashing in house equity and earlier wage increases so further wage increases and tax cuts were their only alternative for income growth.
Mr Conway said productivity growth remained at the same scale, having run at 1.1% for each of the past seven years, and combined with employer tax cuts of almost 10% there would be room for wage increases of 4%-5% during the year.
Mr O'Donovan forecast the labour cost index would continue to accelerate, predicting a record rise of 3.6% during the year.
In the short term, record low unemployment numbers were expected to remain steady at 3.4% with about 77,000 unemployed, but over a longer period of the present economic slowdown would rise by 15,000, pushing the rate to a peak of 4%.
