Finance minister says unemployment rate outperforms key forecasts
New Zealand’s unemployment rate rose slightly to 5.2% in the June quarter, up from 5.1%, while annual wage growth eased to 2.4% – down from 4.3% a year ago.
The economy shed about 2,000 jobs over the quarter and 16,000 over the past year, according to Stats NZ.
Stats also noted a rise in the number of young people returning to education, likely due to softer labour market conditions. With more teens exiting the workforce, the labour force participation rate fell to 70.5%, its lowest level since March 2021.
Despite the shift, Finance Minister Nicola Willis (pictured) said the data showed the labour market was holding up better than expected, RNZ reported.
“Some New Zealanders, particularly in the commentariat, have got themselves into the habit of what I call glass half empty economics,” Willis said.
“On the plain facts of the data, is a lower unemployment rate than was being forecast by Treasury at the budget, that was being forecast by commercial banks, that was being forecast prior to the election.”
She also pointed to promising signs in the agriculture and tech sectors and said construction would rebound as government infrastructure projects ramped up.
Willis said the 16,000 people who had lost their jobs “shouldn’t take it personally” and blamed the previous government.
“What we have inherited is the horrible human aftershock of poor economic management. What happens when you let interest rates and inflation get out of control is that it strangles an economy and it strangles job creation,” she said.
RBNZ eyes inflation, tariffs, and weaker demand
The Reserve Bank has signalled it may cut the official cash rate further if medium-term inflation continues to ease. With inflation now back inside the 1–3% target band, RBNZ has already reduced the OCR from 5.5% to 3.25% since August 2024.
The US has imposed a 10% tariff on NZ exports starting Aug. 1. While the tariffs may stoke inflation in the US, Conway said they will likely depress global demand and weigh on New Zealand’s export volumes.
“On net, these developments are expected to slow New Zealand’s economic recovery over mid-2026 and reduce medium-term inflation pressures,” he told BusinessNZ in a speech in Wellington.
Willis acknowledged the risks, but said Treasury still forecasts unemployment to fall by year-end.
Opposition slams job losses, sector decline
Labour leader Chris Hipkins argued the government was responsible for the job losses – particularly in construction.
“The current government got elected on a platform that they were going to fix the economy, and clearly they've made things significantly worse,” Hipkins said.
“There are 18,000 fewer people working in building and construction than there were at the time of the 2023 election.
“When thousands of people are employed building new state houses, and you stop building state houses, is it any surprise that the number of people working in building and construction goes down?”
Willis rejected that, saying the government was continuing to build state and social housing.
Greens: Government ‘choosing’ to raise unemployment
Green Party spokesperson Ricardo Menéndez March accused the government of pushing people into hardship while cutting support, RNZ reported.
“Increasing unemployment to tackle high inflation is a political choice not new to National governments, but this one has shown little concern at throwing tens of thousands of people out of work,” March said.
“People want to work and there are masses of important projects for people to work on – housing, climate protection, nature regeneration and others. The main barrier to people finding work is this government.”
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
