Don't expect a pay rise anytime soon, experts say
New Zealand’s average wage has climbed by more than $23,000 over the past decade, but workers shouldn’t necessarily expect a pay rise this year.
In 2015, mean annual earnings stood at $55,450, a 2.5% increase from the previous year. According to Stats NZ’s Linked Employer Employee Data, wage growth remained below 3% annually until 2019, when earnings rose 3.9% to $62,000.
When the COVID-19 pandemic hit in 2020, wages rose 3.5% to $64,170, followed by a 2.7% lift to $65,910 in 2021 and a 5.6% surge to $69,620 in 2022.
The largest jump came two years ago, when the mean wage leapt 6.9% to $74,395 — a $4,775 increase.
As of 2024, the average wage sits at $78,731, according to Infometrics analysis of Stats NZ’s quarterly Linked Employer Employee Data, Stuff reported.
Wage growth was driven by a tight labour market
Infometrics chief forecaster Gareth Kiernan (pictured left) said that, overall, the average wage had grown by 4% per annum over the past decade, but “growth has been considerably faster over the last three years.”
Kiernan said that low unemployment made it harder for organisations to attract and retain staff, pushing up wages.
“That was the case during the COVID-19 pandemic as the borders shut, demand conditions across the economy were strong, and the unemployment rate went down to 3.2% in late 2021 and early 2022,” Kiernan said.
“At that time, businesses were reporting that both skilled and unskilled labour was incredibly difficult to find, and stories of staff being headhunted with offers of significant pay increases were widespread.”
Higher unemployment means lower wage pressure
Kiernan warned that the environment for pay rises is shifting.
“There is a strong negative correlation between the unemployment rate and wage growth,” Kiernan said. “Thus, when the unemployment rate is high, wage growth is slower because businesses have a wider pool of talent to choose from, and they do not need to pay more to attract or retain staff.”
Looking ahead, workers may find it harder to negotiate higher wages.
“We expect the unemployment rate to peak in mid-2025 at 5.4%, meaning that there will be limited pressure on wages this year, as demand for additional workers remains soft and there is generally an ample supply of available workers,” Kiernan said.
“As a result, we expect average wage growth to slip below 3%p.a. for the first time since 2018, with the catch-up between wages and the higher cost growth during the pandemic having essentially run its course.”
Labour market weakness is dampening wage growth
Stephen Toplis (pictured right), BNZ’s head of research, echoed Kiernan’s sentiment, noting the softening labour market, Stuff reported.
“A flat quarterly employment with an expanding labour force suggests the unemployment rate will continue to edge higher,” Toplis said. “We expect the unemployment rate to peak around 5.5% later this year. Weak demand and ample labour supply are also dampening wages.”
According to Seek NZ’s Advertised Salary Index, wages slowed to 2.6% year-on-year growth in February — the lowest annual rate since May 2021.
“We expect this moderation to continue as the labour market lags the broader economic recovery,” Toplis said.
