Weak wage growth keeps rate hikes on distant horizon
The latest data show New Zealand’s “unemployment rate ticked up to 5.4% in the December quarter.” At face value, that “doesn’t look good.” But for Kiwi mortgage advisers, the key is what sits underneath: rising participation, modest job growth and still‑subdued wage inflation.
Westpac's Michael Gordon (pictured upper left) notes that jobs and hours grew, but were “outstripped by an even larger rise in participation.” That’s why unemployment nudged higher even as employment rose 0.5% for the quarter. The labour force is expanding, not collapsing – critical context when assessing clients’ employment risk and future borrowing capacity.
Labour supply stepping up – more clients in transition
ASB's Mark Smith (pictured upper right) highlights that the labour market “figures show the economic expansion flowing through into hiring,” even as the jobless rate hits a “10-year high.” Their take: the lift in unemployment reflects labour supply stepping up as people sense better prospects.
Kiwibank's Mary Jo Vergara and Sabrina Delgado (pictured, lower left to right) put it more colourfully: signs of recovery “have more people dusting off their CVs to test the market.” For advisers, that means more clients changing jobs, hours, or industries.
Women driving gains – reshaping household borrowing power
The December quarter saw the 15k rise in employment “entirely driven by growth in female employment,” with more women moving into managerial and professional roles.
Cool wages, patient RBNZ – window for rate strategy
All three banks stress weak wage pressures.
The “private sector Labour Cost Index (LCI) has dropped to 2% (1.98% if we round to two decimal places),” and ASB sees “plenty of spare capacity in the labour market. Wage inflation is low.” Westpac expects a first OCR hike in December 2026, while ASB and Kiwibank see rate hikes “a story for 2027.”
For mortgage advisers, that combination – higher unemployment but low wage inflation and a patient RBNZ – creates a valuable window. Now is the time to:
• Restructure stressed loans before rates rise again
• Lock in sustainable terms for at‑risk sectors
• Educate clients that a softer labour market doesn’t mean imminent rate shock, but does demand prudent planning.
For more insights, read the ASB, Westpac, and Kiwibank reports. The latest unemployment figures can be found on the Stats NZ website.
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