Kiwibank chief economist Jarrod Kerr believed the unemployment number “all but confirms a rate hike from the Reserve Bank in August”, describing it as another upside surprise. Statistics NZ senior manager Sean Broughton said the drop in unemployment was largely in line with other labour market indicators, including declining numbers of beneficiaries, rising job vacancies, “and recent media reports of labour shortages and skills mismatches”. The number of people reporting they were “underutilised”, for example because they were working fewer hours than they wanted, also plummeted, falling by 48,000 people or 13.3 per cent over the quarter. Broughton said that big drop showed that spare capacity in the labour market was dwindling and that could lead to upward pressure on wage rates.
Reserve Bank governor Adrian Orr appeared indicate on Tuesday that he believed the assumption that [an OCR increase on Aug 18] was a done deal might be premature – Investment Watch
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New Zealand May Open Rate-Hike Door Amid Signs Economy Is Overheating
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The Reserve Bank’s monetary policy review next Wednesday, inflation figures due out on Friday week, and labour market data on August 4 would be key as the market weighs up the odds of the first hike in November “or even toys with the possibility of next month”, the bank said. Chief economist Sharon Zollner said it did not matter too much what the published forecasts were. “I think everyone is on the same page really that the risks are that the bank decides ‘the sooner, the better’, because that is certainly my view.” BNZ research head Stephen Toplis said on Tuesday that the economic data supported the Reserve Bank raising the rate now but expected that would be “a leap too far” for the central bank.