Pay levels are creeping up as the economy gets back on track but are not keeping pace with inflation.
Salary and wage rates, including overtime, increased 1.9 percent in the year to June 2011, Statistics New Zealand said today. This includes a rise of 0.4 percent in the June quarter.
The latest annual increase in the labour cost index follows a 1.9 percent increase in the year to the March 2011 quarter and a 1.7 percent increase in the year to the December 2010 quarter. After the 2008/09 recession, annual wage rate growth reached a low of 1.5 percent in the year to the March 2010 quarter.
In comparison, inflation is running at 5.3 percent. But according to ANZ chief economist Cameron Bagrie, that's not comparing apples with apples.
"This is slightly misleading as the tax changes in October included both a rise in GST but also a cut in income tax rates."
He said various core measures of inflation are currently running around 2.5 percent.
The average size of pay increases remained about the same but the proportion of wage rates increasing continued to rise. Fifty-eight percent of salary and ordinary time wage rates in the LCI sample rose, up from 56 percent, 53 percent, and 49 percent in the previous years.
Salary and wage rates for the private sector increased 2 percent in the year to June, on top of a 2 percent increase in the year to March.
Public sector rates rose 1.5 percent, following 1.4 percent growth in the year to the March 2011 quarter.
In the construction industry, the proportion of salary and ordinary time wage rates that rose, the median increase, and the mean increase were all significantly higher in Christchurch than nationally.
Treasury has warned rebuilding in Canterbury will put pressure on inflation, and higher wages and material prices may need to be paid.
The Quarterly Employment Survey (QES), also released today, showed employment measures remained steady while total paid hours and average earnings continued to rise. The number of full-time equivalent employees remains flat at 1.33 million, while total paid hours increased 1.6 percent.
For the same period, average total hourly earnings climbed 3.1 percent, compared with a rise of 2.6 percent in the March 2011 year.