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Moderate Increase In Labour Costs

Labour Cost Index (All Labour Costs): June 2001 quarter

Labour costs rose by 1.8 per cent from the June 2000 quarter to the June 2001 quarter, according to latest figures from Statistics New Zealand. This increase follows a rise of 1.6 per cent from the June 1999 quarter to the June 2000 quarter.

The costs of other business inputs rose more strongly than labour costs. Producer input prices rose by 8.1 per cent from the June 2000 quarter to the June 2001 quarter, while capital goods prices increased by 3.8 per cent. These increased input costs were reflected in the prices charged by businesses for their outputs, which rose 6.1 per cent from the June 2000 quarter to the June 2001 quarter. Consumer prices rose by 3.2 per cent over the same period.

The salary and wage rates component of the Labour Cost Index increased by 1.8 per cent from the June 2000 quarter to the June 2001 quarter, while the non-wage labour costs component increased by 2.2 per cent over the same period.

The non-wage labour costs movement was partly driven by a 5.2 per cent increase in annual leave and statutory holiday costs. This calendar year the total number of paid statutory holidays rose by one day to 11 days, due to Waitangi Day falling on a weekday. A number of employers also reported increases in annual leave entitlements.

Employer superannuation costs also contributed to the rise in non-wage labour costs. These costs rose 1.4 per cent. Factors which contributed to this rise were higher pay rates and, in some cases, higher employer contribution rates following actuarial reviews. These were partly offset by falling participation, with the number of employers citing membership reductions outnumbering those citing membership increases by nearly two to one.

Workplace accident insurance costs fell 8.4 per cent from the June 2000 quarter to the June 2001 quarter. This was due to premium rate reductions and to safety management discounts available since the provision of workplace accident insurance was renationalised in July last year. This year's movement follows a decrease of 22.2 per cent last year, which reflected the year-long period of deregulation. Costs are now 39.1 per cent lower than the June quarter peak in 1997, but only 1.5 per cent lower than in the June 1993 quarter, the first June quarter in the series.

Other non-wage labour costs ? medical insurance, motor vehicles available for private use and employment-related low interest loans ? fell by 6.5 per cent overall from the June 2000 quarter to the June 2001 quarter. Almost all of this drop was caused by fringe benefit tax (FBT) rates under the new multi-rate regime being lower than last year's transitional flat rate of 64 per cent. These costs rose 4.2 per cent last year when the FBT rate rose from 49 per cent. Over the two-year period from the June 1999 quarter to the June 2001 quarter, other non-wage costs fell by 2.6 per cent.

Brian Pink Government Statistician END

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