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Monthly economic review: November 2017

09 Nov 2017
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New Zealand’s unemployment rate fell to 4.6 percent in the September 2017 quarter, its lowest unemployment rate since the December 2008 quarter (on a seasonally adjusted basis). There were 126,000 people unemployed in seasonally adjusted terms in the September quarter. Employment growth was higher than expected, rising by 2.2 percent in the quarter. It followed a drop in employment of 0.1 percent in the previous quarter, which indicates some volatility within the survey. The BNZ said that “Q3 New Zealand employment data was simply too strong to believe”. The labour cost index (including overtime) rose by 0.6 percent in the September quarter and by 1.9 percent in the year ended in the September quarter. A significant factor behind the increase in the September quarter was the impact of the Care and Support Workers (Pay Equity) Settlement Act 2017, which came into effect from 1 July 2017.

Inflation in the September 2017 quarter, at 0.5 percent, was above Reserve Bank, Treasury and market expectations. As a result, annual inflation rose to 1.9 percent in the year ended in the September quarter. Vegetable prices rose by 6.2 percent in September as a result of wet winter conditions and seasonal factors. Local authority rates and payment costs rose by 3.5 percent, with the majority of local authorities increasing their rates from 1 July. Housing-related costs also rose in the quarter, with house rentals rising by 0.6 percent, costs associated with the purchase of new housing rising by 1.1 percent, and dwelling insurance premiums rising by 6.1 percent. The cost of petrol fell by 1.7 percent in the September quarter, despite petrol prices increasing in both August and September.

Fonterra has reconfirmed its forecast payout of $6.75 per kilogram of milksolids (kgMS) for the 2017/18 season, plus a forecast earnings per share range of 44 – 45 cents. This results in a total payout of $7.20 - $7.30 for the season (before retentions) for a fully share-backed farmer. International dairy prices have fallen in recent Global Dairy Trade auctions, raising the possibility of a payout downgrade this season. Due to wet weather conditions during August and September, Fonterra has reduced its forecast output for the current season to 1,540 million kgMS (down from 1,575 million kgMS).

New Zealand’s population increased to 4,793,700 at 30 June 2017, up 2.1 percent (or 100,400 people) from a year earlier. An excess of births over deaths (termed the ‘natural increase’) accounted for 28,100 additional people living in New Zealand during the year, while net migration accounted for an additional 72,300 people. The population of the North Island rose by 80,700 during the year, while the South Island population expanded by 19,700. The Auckland region recorded an increase in population of 42,700 people during the year to 1,657,200 (up 2.6 percent). The only region to record a drop in population was the West Coast (whose population fell by 100 people).

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