9 Nov 2009

Economists believe early rise to interest rates unlikely

5:54 am on 9 November 2009

Economists believe it is unlikely the Reserve Bank will raise interest rates early next year, after the unemployment rate hit a nine-year high.

Statistics New Zealand's Household Labour Force Survey issued on Thursday shows unemployment rose from 6% percent to 6.5% in the three months to September, or 150,000 people.

Employment shrank 0.8% to 2.15 million, while hours worked declined 0.7%.

ASB chief economist Nick Tuffley believes the figures all but rule out a rate increase as early as January, as some in the market had thought.

Mr Tuffley believes unemployment will now peak above 7%.

The head of research at BNZ Capital, Stephen Toplis says the labour market will continue to deteriorate for some months yet and is picking unemployment to hit 7.5%.