New Zealand Has Smallest Working-Age Population Gain Since 2012
(Bloomberg) -- New Zealand posted the smallest increase in its working-age population in nine years last year, adding to signs of a labor shortage that could drive up wages and inflation.
The number of residents aged 15 years and over who could work rose by 26,500 to slightly more than 4.1 million in 2021, Statistics New Zealand said Wednesday in Wellington. That’s the smallest gain since 2012 and compares to a 70,500 increase in 2020.
New Zealand’s border has been closed to foreigners since March 2020, and the flood of citizens returning home during the first months of the Covid-19 pandemic has dried up. As labor shortages have begun to stoke wages and fuel faster inflation, the Reserve Bank has started to lift interest rates.
“If there’s a business out there that can’t get imported labor they are competing in the domestic labor pool to fill those vacancies, so most certainly it is contributing to tightness in the labor market,” said Miles Workman, a senior economist at ANZ Bank New Zealand in Wellington. “Covid has actually turned out to be much more of a supply shock and therefore an inflationary shock, and that includes wages.”
The RBNZ increased the official cash rate twice in the final quarter of 2020 and signaled in November it will need to tighten policy more quickly than previously expected.
The central bank projected the working-age population would increase by 32,000 in 2021 and by 40,000 this year. It saw the jobless rate dropping to 3.2% in the fourth quarter of 2020 from 3.4% three months earlier.
Workman said the risks to price pressures in the economy are to the upside, and could get exacerbated if Omicron enters the country and prompts people to drop out of the labor market. Still, there are offsetting downside risks to demand and economic growth that the RBNZ will need to take into account when setting policy, he said.
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