The unemployment rate in New Zealand fell to pre-pandemic levels during the second quarter of 2021, increasing expectations of the Reserve Bank of New Zealand hiking the official cash rate (OCR) at its meeting later in August.
Data released by Statistics New Zealand on Wednesday show that unemployment rate fell to 4% during the second quarter of 2021, form a revised estimate of 4.6% in the previous quarter.
Unemployment is now the lowest it has been since December 2019, before the COVID pandemic hit, which had reached as high as 5.3% during COVID.
“The unemployment rate is now back to the cycle-low reached in 2019, when labour market conditions were clearly getting tight and wage growth was rising…Overall, these surveys reinforce the likelihood of an OCR hike at this month’s Monetary Policy Statement [by the RBNZ]…Today’s figures underscore that the domestic economy is running hot, and no longer warrants the degree of monetary stimulus that’s currently in place,” wrote Michael Gordon, acting chief economist for New Zealand at Westpac, in a note.
“Today’s data shows we’ve flown past full employment, and the economy is becoming quite overheated. The RBNZ needs to hike the OCR promptly to get on top of this,” economists at ANZ Bank wrote in a note.
The bank said it now expects the RBNZ to keep raising the OCR till it reaches 1.5% in 2022, as against an earlier expectation of 1.75%, following the RBNZ’s recent announcement that they will further tighten macroprudential policy.
The Kiwi dollar gained against the Greenback after the data release. During mid-day trade in Wellington, the NZD was 0.55% higher than the previous close at 70.56 US cents.