Q4 Employment growth remained healthy. Jobs growth was driven by full-time work, generally seen as a vote of confidence by employers. The key surprise was a further lift in labour force participation to a fresh record, which is the reason for the lift in the unemployment rate. The combination of strong migration inflows and a high willingness to work continues to strongly boost the supply of workers. Wage growth was fairly benign, with little sign of growing inflation pressure, and the surprising elasticity of labour supply will keep wage-driven inflation side-lined in the near term at least.
We continue to expect the RBNZ to hold the OCR at 1.75% at next week’s MPS, with the underlying data showing the labour market is still robust despite the uplift in the headline unemployment rate. But, just as there are no grounds to cut the OCR, equally there is no reason to expect hastened OCR increases. We expect the RBNZ to be on hold for an extended period, to late 2018.