Unemployment, wage figures show no need for further action from Reserve Bank - economist Nick Tuffley

The latest unemployment rate and wage growth figures will likely strengthen the Reserve Bank's stance on pausing official cash rate hikes, an economist says.

Statistics NZ reported on Wednesday the unemployment rate had shifted up to 3.6 percent in the June quarter from 3.4 percent. Meanwhile, wage growth was at 4.3 percent - slightly below the 6 percent latest annual inflation figure.

That slight jump in unemployment came as no surprise to ASB chief economist Nick Tuffley.

"We think, from here, unemployment's going to be pretty flat," Tuffley told AM Early.

"It's just an early sign the labour market is turning and reflecting the fact the economy's been slowing at the same time as we've had a lot of people arrive."

He said employment growth had been "resilient" despite the economy falling into a technical recession.

From here, however, unemployment is expected to "gradually creep up", he said.

Nick Tuffley.
Nick Tuffley Photo credit: AM

"Population growth is still going to be pretty strong, jobs growth will be subdued and, heading towards next year, we think we'll be ticking above 5 percent [unemployment].

"We think the [unemployment] peak's going to be 5 [or] a little bit above 5 percent."

The Reserve Bank (RBNZ) last month decided to hold the official cash rate for the first time in nearly two years, believing it had done enough to dampen demand in the economy and cool inflation - which has dropped from its 7.3 percent peak.

Its next monetary policy statement, which sets out the central bank's forecasts, was due on August 16. The last monetary policy review indicated the official cash rate - at 5.5 percent - had peaked.

Tuffley said it was likely the bank could now be less aggressive, hence the cash rate pause.

"In this sort of market, [it's] a pretty flat economy… and that's going to contribute to, hopefully, the Reserve Bank, fingers crossed, not needing to put interest rates up any further.

"We think the Reserve Bank will see enough in there to go, 'OK, look, labour market's easing, wages are coming down, that's good.'"

Tuffley said the latest consumer price index data also showed inflation was "heading in the right direction".

"[The RBNZ will] be keeping an eye on those employment figures… they'll be happy to wait and see but they've still got to be watchful."

Tuffley said while the RBNZ would want to see wage growth and inflation slow more quickly, overall, the labour market was in for a softer landing than anticipated, he said.