2 Nov 2011

Wage rates no push for raising interest rates

9:00 am on 2 November 2011

Wages are expected to keep rising at a moderate pace, giving the Reserve Bank time to sit on the sidelines before raising interest rates.

Statistics New Zealand's Labour Cost Index shows salary and wage rates rose 2% in the year to the end of September.

At the same time the cost of living, measured by inflation, rose 4.6%.

Goldman Sachs economist Philip Borkin says while wages appear to be growing at a slower pace than inflation, the trend is positive.

He says the figures do not take into account the fact there have been personal tax cuts and reductions in the cost of servicing debt because of low interest rates.

Mr Borkin says household disposable incomes are higher than the statistics indicate.

He says there is no real sign that wages are getting out of hand and the Reserve Bank has time to wait before raising the Official Cash Rate.