New forecast shows economy 'remains resilient in face of challenging conditions'
More people will be at work while wages will outpace inflation based on the latest estimates from New Zealand's Pre-election Economic and Fiscal Update (PREFU) that was released on Tuesday.
"Unemployment is forecast to remain below the long-term average of 5.8% – peaking at 5.4% before declining to 4.6% at the end of the forecast period," said Finance Minister Grant Robertson in a statement.
According to the PREFU, the June quarter unemployment rate for 2024 will be 4.8%. For the following years in the same quarter, it will be:
- 5.4% (2025 forecast)
- 4.8% (2026 forecast)
- 4.6% (2027 forecast)
The report attributed the 5.4% peak to slow economic growth, with its eventual decline in 2027 pinned on economic recovery.
Wages outpacing inflation
Meanwhile, wage growth in New Zealand is expected to be ahead of inflation in the coming years, according to the report.
It estimates that the annual wage growth will be 6.2% in 2024. For the following years, it will be:
- 5.2% (2025 forecast)
- 4.0% (2026 forecast)
- 3.7% (2027 forecast)
"Wage growth will outpace declining inflation, meaning household budgets will stretch further," Robertson said.
This year's June quarter saw a record number of Kiwis employed as employment hit 70%, while average hourly wages rose 6.9% to $39.53.
Meanwhile, the PREFU also predicted the economy to grow 2.6% on average during the forecast period, with a recession not in sight.
"The PREFU shows New Zealand remains resilient in the face of challenging conditions thanks to the government's economic plan," Robertson said.
"We are striking a balance between supporting New Zealanders with cost-of-living pressures and investing in strong public services and a resilient infrastructure network while carefully managing our resources to ensure the long-term sustainability of the economy."
