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Labour Costs Increase

Labour Cost Index (All labour Costs): June 2000 quarter

Labour costs rose by 1.6 per cent from the June 1999 quarter to the June 2000 quarter, according to Statistics New Zealand. This was up on the 0.5 per cent increase recorded for the previous year.

However, the costs of other business inputs rose more strongly than labour costs. Producer input prices rose by 5.5 per cent from the June 1999 quarter to the June 2000 quarter, while capital goods prices increased by 2.4 per cent. These increased input costs were reflected in the prices charged by businesses for their outputs, which rose 3.9 per cent from the June 1999 quarter to the June 2000 quarter. Consumer prices rose by 2.0 per cent over the same period.

Increases of 1.6 per cent were recorded for both the salary and wage rates component and the non-wage labour costs component of the Labour Cost Index from the June 1999 quarter to the June 2000 quarter.

The non-wage labour costs index rise was mainly driven by a 5.3 per cent increase in annual leave and statutory holiday costs. This year the total number of paid statutory holidays rose by one day to 10 days, due to Anzac Day falling on a weekday.

It was also due to employer superannuation costs rising 3.7 per cent from the June 1999 quarter to the June 2000 quarter. In the June 2000 quarter some employers reported having had membership drives and having opened schemes to new members. The annual increase in salary and wage rates and strong growth in membership in many schemes were only partly offset by scheme closures and falling participation in other schemes.

Meanwhile, workplace accident insurance costs fell 22.2 per cent from the June 1999 quarter to the June 2000 quarter. About half of this decrease was due to falls in ACC's residual claims levy rates to fund the ongoing costs of historical workplace injuries. The remainder was due to premium rates during the year-long period of deregulation being lower on average than ACC's base premium rates for the period which ended 30 June 1999.

Other non-wage labour costs - medical insurance, motor vehicles available for private use and employment-related low interest loans - rose by 4.2 per cent overall from the June 1999 quarter to the June 2000 quarter. This rise was driven by an increase in the fringe benefit tax (FBT) rate. Fringe benefits provided on or after 1 April 2000 incurred an increased FBT rate of 64 per cent, up from 49 per cent.



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