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New Zealand Wage Inflation Post-crisis


  • Adam Richardson


Nominal wage and consumer price inflation have been subdued in New Zealand post crisis, particularly since 2012. This paper discusses a number of candidate explanations for these muted nominal wage inflation outcomes. The most notable explanations include: a gradual absorption of spare capacity amongst New Zealand's major trading partners; sharp declines in oil and export commodity prices in 2014/15; a significant rise in labour supply, and less inflationary pressure stemming from migration; and a change in price setting behaviour, with inflation expectations becoming more adaptive. This paper also summarises early work using micro-data that offer further insights into the drivers of low nominal wage inflation. A slow rate of job-to-job transitions helps explain some of the weakness in nominal wage inflation. In contrast, preliminary analysis suggests changes in labour market monopsony power of firms do not look to be a significant driver of low wage inflation in New Zealand.

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  • Adam Richardson, 2019. "New Zealand Wage Inflation Post-crisis," RBA Annual Conference Papers acp2019-02, Reserve Bank of Australia, revised Jul 2019.
  • Handle: RePEc:rba:rbaacp:acp2019-02
    Note: Paper presented at the RBA's annual conference 'Low Wage Growth', Sydney, 4–5 April 2019.

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    References listed on IDEAS

    1. Jamie Culling & Hayden Skilling, 2018. "How does New Zealand stack up? A comparison of labour supply across the OECD," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 81, pages 1-19, April.
    2. Efraim Benmelech & Nittai K. Bergman & Hyunseob Kim, 2018. "Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?," Working Papers 18-15, Center for Economic Studies, U.S. Census Bureau.
    3. Özer Karagedikli & C. John McDermott, 2018. "Inflation expectations and low inflation in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 52(3), pages 277-288, September.
    4. Rebecca Williams, 2017. "Characterising the current economic expansion: 2009 to present day," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 80, pages 1-22, June.
    5. Tugrul Vehbi, 2016. "The macroeconomic impact of the age composition of migration," Reserve Bank of New Zealand Analytical Notes series AN2016/03, Reserve Bank of New Zealand.
    6. Michael Callaghan & Jamie Culling & Finn Robinson, 2018. "Ageing is a drag: Projecting labour force participation in New Zealand," Reserve Bank of New Zealand Analytical Notes series AN2018/10, Reserve Bank of New Zealand.
    7. Rebecca Williams, 2017. "Business cycle review: 2008 to present day," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 80, pages 1-22, March.
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    More about this item


    wages; forecasting; Phillips curve; job-to-job transition; price setting; migration; global economy; New Zealand;
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