Skyrocketing inflation will wipe out rising wages, research finds

Skyrocketing inflation will continue to wipe out wage rises as New Zealand battles a cost of living crisis, according to new research. 

Unemployment fell to 3.3 percent in the September quarter, well below what it was before the first COVID-19 lockdown in March last year. A lack of staff has forced employers to offer higher pay to get and retain workers.  

But recruitment company Robert Walters has said higher pay is still being wiped out by inflation, with 79 percent of workers surveyed saying they will look for new work if they don't get a salary wage bump that matches the rising cost of living within the next year. 

However, almost 70 percent of employers told researchers they didn't expect to offer salary increases above inflation in the coming year.

Salary and wage rates went up 3.7 percent in the year to September, still well below 7.2 percent inflation. 

"Costs… they've risen significantly, as well, over the past 24 months," said Shay Peters, the managing director of Robert Walters Australia and New Zealand. 

"Employment costs, as you know, have gone up significantly over the past 24 months.

"Everything is going up at the moment so, as an employer, we're in the same boat as you and if we want to have a sustainable organisation, we need to be able to make sure we're looking after ourselves financially as well."

Peters said New Zealand's squeezed labour market might also start softening next year, meaning it won't be as easy for people to leave their current jobs.

"If you're looking to move on, there might not be as many opportunities moving forward."

A lot of firms were also likely to try and cut costs next year, Peters said, with New Zealand tipped to plunge into recession.

"All businesses could potentially be in the same boat here, where they're trying to tighten their belt and make sure they're sustainable and acting responsibly.

"What I'd like to encourage everyone is [to] get around the table and actually create and open up some more dialogue around this, because communication is going to be key."

Overall, he said businesses must also be fiscally responsible to be sustainable. 

"I think we've got to see what's coming over the horizon and that could be some pretty scary economic times, so we just need to be sensible around the table with these pay negotiations."

The Reserve Bank's goal is to keep inflation below 3 percent and it's predicted to deliver another couple of equal record-high 75 basis point hikes early next year to try and tame skyrocketing prices.