Wages expected to grow as GDP growth hits high

NZ money (iStock)
NZ money (iStock)

The latest figures show gross domestic product (GDP) grew 0.9 percent in the June quarter, taking annual growth to 3.6 percent.

Driven by housing, strong demand for exports and immigration, New Zealand now has the third highest growth rate in the OECD.

However, how much of the increased growth is getting through to workers?

ANZ chief economist Cameron Bagrie says any growth flows into the economy and eventually into wages.

"If we continue to see unemployment track down, wages will start to move up and people will start to get ahead.

"We're seeing real wage growth at the moment of 1.5 percent, but I'm expecting that to grow to 2.5 percent over the next 24 months."

However, critics say we're relying on immigration and on a per person basis New Zealand's hardly growing at all.

"The biggest disappointment is the fact that it's driven by population growth rather than by increasing the quality of what we are doing. Our productivity growth is probably going backwards," says CTU economist Bill Rosenberg.

Finance Minister Bill English admits wage growth may take some time.

"At the moment you've got a fast growth population and that means you're going to have per capita income a bit softer," says Mr English.

International economist Ann Pettifor says New Zealand's economy is "hugely imbalanced".

Ms Pettifor, a UK-based economist and director of Prime: Policy Research in Macroeconomics, told Paul Henry central banks, including New Zealand's Reserve Bank should be managing the way banks lend money.

"In Auckland, banks are lending crazy money on speculation - speculating that property prices will rise.

"It's overvalued bricks and mortar and speculating that that price will continue rising forever and of course it won't and when it starts falling then the debt has to be re-payed and the equity in the property falls."

She says talk of New Zealand being a "rockstar economy" was "the kind of language we heard before the [Global Financial Crisis]".

"But what's interesting about New Zealand is that inequality rose in this country more than in any other developed country in the world between 1980 and the 2000s - that's extraordinary."

She says those levels of inequality lead to political instability which has led to the rise of the likes of Donald Trump and "fascists in Europe".

Labour's finance spokesperson Grant Robertson says everyday Kiwis won't be feeling the benefits of GDP growth.

"The answer is because on a per person basis our economy is barely moving.

"We have seen enormous population growth in New Zealand in the last year and that generates economic activity. But what these numbers show is that we are not getting the increased economic value from that to mean real sustainable growth. This adds further to the need to review and adjust immigration policy to ensure it contributes to real growth."

He says real disposable income per capita fell in the past quarter, meaning Kiwis "don't feel they're getting ahead".

Mr Robertson says the economy is being kept afloat by population growth and an unsustainable housing bubble.

Newshub.

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