The foundation for successful investment is being aware of behavioural biases and controlling these, setting realistic investment objectives and having an appropriate asset allocation to achieve those objectives.
New Zealand’s unemployment rate falls to 4%, our Economist shares his insight
The June quarter unemployment rate suggests the labour market performed better than most economists had expected. However, the headline unemployment rate masks a marked deterioration over the quarter. Further headwinds are ahead for New Zealand businesses and workers. Although the unemployment rate may not now reach the 8% to 9% that many had previously predicted, it will likely still rise significantly further from its current low level, perhaps to around 7% to 8%.
Unemployment Rate Not the True Picture
New Zealand’s unemployment rate surprisingly fell to 4% in the June quarter from 4.2% in the March quarter. However, this is an average unemployment rate over the three months to June, which masks a deterioration in the labour market over the quarter. Statistics New Zealand reports that based on sampling in the final week of June (which is small and has a large margin of error associated with it), the unemployment rate has risen to around 6.2%.
In contrast to the picture painted by the headline unemployment rate, measures of worker utilisation suggests a marked downturn in the use of labour. Hours worked declined 10.3% in the June quarter, while labour underutilisation increased to 12% from 10.4% in the previous quarter. There was also a decline in labour market participation as unemployed workers stopped looking for jobs during lockdown. A bounce-back in participation will be a headwind for the unemployment rate in coming quarters.
Policy Will Remain Supportive
With the Government’s wage subsidy scheme due to expire in September, New Zealand’s borders remaining closed, and a precarious global economic situation, it is likely that the New Zealand labour market will get worse before it recovers. The Reserve Bank of New Zealand (RBNZ) will remain accommodative when it announces its latest monetary policy decision next week. The RBNZ will likely expand its Large Scale Asset Purchase programme from its current $60 billion limit to $90 billion. It will also likely signal possible other future monetary policy actions like a negative Official Cash Rate (OCR) and foreign bond purchases.
The Government will also keep the fiscal spending taps on, although it has signalled that the wage subsidy is too expensive to continue for an extended period. It will therefore likely rely on its large announced infrastructure programme and targeted grants to sectors affected by COVID-19 to maintain economic support.
This advice is general or “class” in nature, not specific or personalised to you. It does not take into account your financial situation or goals and, accordingly, does not constitute personalised financial advice under the Financial Advisers Act 2008. If you require personalised financial advice, there is a process to go through before that can be provided to you.
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