NZEE Information for Client Services Agents

The following information has been gathered from recent news articles and national economic information. It does not specify particular skills shortage areas and should be read as general information

Summary

The economic recession continues to have an impact on industry and employment in New Zealand. The March quarter unemployment rose to 5% as predicted and companies continue to reduce their staff numbers through natural attrition (not replacing employees who leave) and through redundancy as the financial crisis bites harder

Labour Market

The New Zealand labour market has continued to weaken due to the difficult economic conditions. With real GDP falling for the past year employment has started to follow suit, falling by 1.1% over the March 2009 quarter. The large drop in part-time employment and the small fall in usual hours worked may indicate that firms have had to start cutting staff numbers rather than reducing their hours.

 While the unemployment rate for the March 2009 quarter was more positive than expected by most commentators, this was largely due to a higher than expected fall in participation. Today's figures have some similarities with those for the March 2008 quarter, which also went against market expectations. This picture of an easing in the labour market is consistent with other surveys showing a reduction in skill shortage indicators, slowing wage growth and negative employment intentions. Despite the easing, the labour market has held up relatively well during the economic downturn. Employment is still up by 0.8% over the year, despite the economy being in recession since the beginning of 2008. The unemployment rate has risen to a six-year high of 5.0% but remains relatively low on an historical basis and well below the OECD average of 7.3%. New Zealand has not suffered the large increases experienced in other countries such as the United States, Ireland and Spain. (Source: www.dol.govt.nz)

 CPI

The Consumers Price Index (CPI) is a measure of the price change of goods and services purchased by private New Zealand households.
Often used as a measure of inflation, it covers prices for:

• food
• alcoholic beverages and tobacco
• clothing and footwear
• housing and household utilities
• household contents and services
• health
• transport
• communication
• recreation and culture
• education
• miscellaneous goods and services.

The CPI is produced quarterly from prices gathered in a range of surveys at 15 urban areas. Its base (=1000) is currently the June 2006 quarter.

Highlights

 In the March 2009 quarter compared with the December 2008 quarter:

• The Consumers Price Index (CPI)rose0.3 percent.
• Foodprices rose1.2 percent, with the main contribution coming from higher prices for grocery food.
• Alcoholic beverage and tobaccoprices rose 1.8 percent, driven byhigher prices for cigarettes.
• Transportpricesfell1.5 percent, due mainly to lower prices for international air transport.

 From the March 2008 quarter to the March 2009 quarter:

• The CPI increased3.0 percent.

(Source: www.stats.govt.nz)

 OCR

On 30 April the Reserve Bank reduced the Official Cash Rate (OCR) by 50 basis points to 2.5 percent.

Comments from Reserve Bank Governor Alan Bollard: "Overall, developments since March point to lower medium-term inflation than previously projected. The main factors behind this are weaker global growth, and an unwarranted tightening in financial conditions via both higher long-term interest rates and a stronger exchange rate than expected.

Global financial markets have showed some tentative signs of stabilisation since the March Monetary Policy Statement and governments in the major economies are continuing to make progress in resolving their banking system difficulties. However, a large amount still needs to be done and sentiment remains fragile. Negative feedback from the global recession could also still adversely affect financial institutions.

The world economy deteriorated further than expected in the first quarter of 2009. While monetary and fiscal policy responses in many countries have been substantial and there are some signs of stabilisation in some countries, we still expect the adverse economic forces generated by the crisis to remain dominant throughout 2009. The timing and extent of global recovery remain highly uncertain.

While the New Zealand economy has not experienced the same extreme falls in economic activity as seen in a number of our trading partners, it remains weak. Business sentiment is low, investment has been curtailed and employment reduced.

We expect the large decline in the OCR over the past year to pass through to more borrowers over coming quarters as existing fixed-rate mortgages come up for re-pricing. This, together with the stimulus from fiscal policy, will act to support the New Zealand economy and eventually see activity trough and pick up thereafter. However, the scale of the global financial crisis and domestic adjustments underway are such that it is likely to be some time before economic activity returns to robust and healthy levels.

We consider it appropriate to provide further policy stimulus to the economy. We expect to keep the OCR at or below the current level through until the latter part of 2010. The OCR could still move modestly lower over the coming quarters."

Job Losses

Redundancies are still being felt nationwide. Of major interest is the Christchurch-based clothing manufacturer, Lane Walker Rudkin, went into receivership in May due to personal circumstances, causing major job losses. The Government continues to tighten its belt and many of the government ministries and departments are trimming numbers, including: Ministry of Social Development, Department of Labour, State Services Commission, Ministry for the Environment, Inland Revenue, and Ministry of Justice

Budget 2009

The 2009 Budget is due to be announced on 28 May. Finance Minister Bill English is damping down expectations that there will be 'something in the Budget for everyone', as the first National Budget in a decade rolls off the presses.

"People won't be finding a lot of money in their bank account after this one," he said.

A $330 million insulation scheme is likely to be the centrepiece of the Budget. Up to 900,000 homeowners will be eligible for $1500 insulation grants.

But promised tax cuts seem certain to be axed. Labour's last Budget delivered the first significant personal tax cuts in more than a decade but it also signalled the end of a long run of Budget surpluses. Labour finance minister Michael Cullen thought he had a $3.1 billion surplus to play with, but recession has turned it into an $8b-plus deficit.

Mr English conceded yesterday that it would be five years or more before any government got its books back into the black again. He insisted that it would be a "no surprises" Budget. "It is a predictable Budget and the focus is on getting debt under control."

To be announced in the Budget is a home insulation fund. Close to a billion dollars is to be spent on insulating and heating homes with subsidies available to all New Zealanders, regardless of how much they earn. The insulation programme could also reduce the strain on the health system, saving lives during winters. The Government plans to subsidise insulation and heating of as many as a million homes built before 2000 that fail to meet current building standards. Up to $1500 will be invested in each upgrade, costing up to $1 billion in the next four years. It is understood the Government will pay the full cost of the renovations costing more than $1500. Industry sources said the work could take between six and eight years and save billions in health and fuel costs.  Hopefully this may also provide employment opportunities

Industry Positives

There is no significant change to the March report

Health - Doctors are leaving in droves for more money in Australia. There is a key shortage of medical staff across the country and especially in rural areas. Nurses are in constant shortage

Education - ECE, Primary, Secondary, Special Education, Auckland

Agriculture - NZ has a strong food-based export sector

Dairy industry workers - these may not fit into a skilled migrant category but the South Island is seeing a major conversion from sheep farming to dairying

Industry Decline:

There is no significant change to the March report

Building and construction industry - the housing decline continues and closure/liquidation of several lumber/timber mills. However there seems to be a continuation of 'refurbishment' rather than new building

Engineering and construction

Tourism - international recession hitting visitor numbers

Sales of cars, electronics and other luxury items

Employment

The Job Summit earlier this year came up with 20 key projects to assist employment in NZ. Several companies have negotiated with their workers to adopt the Government's nine-day fortnight to stave off job cuts.  The scheme, which provides a taxpayer-funded payment of $62.50 a fortnight for each worker not made redundant for up to six months, began in late March

Source: Helen Wilson
New Zealand Employment Expert
ODG Recruitment International