BNZ Weekly Overview
The key points of this week's publication include the following.
Tight Labour Market But Low Wage Rises
We present data showing a tight labour market but good business capital spending growth which is increasing productivity vital to moving up the OECD ladder. But why isn't wages growth accelerating? Why are employees not taking advantage of their bargaining power (be they on collective or individual contracts) to seek more money?
And is it possible that our fixation on 1-3% inflation is preventing businesses from raising selling prices given that fewer than 50% cite finding more customers as the main reason they can't sell more product.
Unless we see some price response via accelerating growth in wages, consumer and industrial goods prices to reflect worsening capacity and product shortages then one has to question just how much the free market is really operating in New Zealand.
BNZ EuroStock Funds Returned
We discuss the low return on this product to us investors over the past three years but how by taking exposure to European equities this way rather than in an unhedged non-capital guaranteed fund one is around 43% better off.
US Jobs Data Awaited
In global interest rate and exchange rate markets the focus is all on Friday night's US labour market data for April. If another strong gain near March's 308,000 is reported then the USD will rise, NZD fall, and long term interest rates jump higher. If the result is weak ? say near zero - then the USD will fall, NZD jump up, and long term interest rates decline.
The Weekly Overview is freely available to all BNZ staff, customers, and the public with a centralised EMAIL ONLY distribution list managed here. If you wish to add, change or delete an email address please reply to this message or email firstname.lastname@example.org. Sections of the WO may be reproduced by anyone other than mortgage brokers provided the BNZ is noted as the source.
Tony Alexander Chief Economist Bank of New Zealand