7 Feb 2013

Increased competition likely to affect labour costs

8:44 am on 7 February 2013

Increased building activity and competition for skilled workers in earthquake-hit Canterbury are expected to put pressure on labour costs in the future, eventually flowing through to other regions.

Latest official figures show wage growth remains steady at a subdued annual rate of around 2%.

ASB chief economist Nick Tuffley says there are signs that construction wage costs in Canterbury are lifting sharply, tieing in with rising prices in the sector.

"We are seeing signs that in Canterbury, the need to attract the right sort of skills into the region is starting to put on wages in that sector.

"In time, it's likely to spread to some degree beyond Canterbury as the competition for workers in the construction industry heats up.

"In the short term, it doesn't look like there's going to be any spillover. But longer term, as we also see other parts of the country, particularly Auckland, pick up in terms of construction activity, there'll be just that added competition between regions to get hold of workers."

Mr Tuffley says despite the increased competition for workers, wages will not rise dramatically in the next two years.

Meanwhile, official figures to be released on Thursday are expected to show a 0.5% increase in employment and a slight drop in the unemployment rate to 7%.