New Zealand pricing, wage expectations pose inflation threat
A net 84% expect to pay higher wages over the next year
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[WELLINGTON] New Zealand companies are facing higher costs and more expect to raise wages to retain or hire staff, adding to signs of underlying inflation pressures, according to a business survey.
A net 79 per cent of companies expect higher costs in the next three months – the highest since 2023 – while 53 per cent expect to raise prices, ANZ Bank New Zealand said on Thursday (Feb 26) in its February Business Outlook report. A net 84 per cent expect to pay higher wages over the next year.
Signs of emerging price pressure will be unwelcome for the Reserve Bank of New Zealand (RBNZ) at a time when inflation is already above the central bank’s 1 to 3 per cent target band.
While governor Anna Breman last week said that she is confident that price pressures can be contained, economists and investors are wary that inflation won’t slow significantly without an interest rate hike some time this year.
“The survey continues to show inflation pressures rising,” said ANZ New Zealand chief economist Sharon Zollner. “The increase in wage pressures looks very modest thus far, but the level of pricing intentions is not consistent with widespread expectations that headline inflation will trend lower this year.”
The RBNZ last week projected inflation would slow to 2.3 per cent by the end of the year from 3.1 per cent in the fourth quarter of 2025. It left the Official Cash Rate at 2.25 per cent and signalled only the possibility of a hike this year, saying there is enough slack in the economy to absorb price pressures as demand grows.
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Firms’ average inflation expectations rose to 2.93 per cent, the highest since July 2024, the report showed. Companies expect their average increase in wages over the next 12 months will be 3 per cent.
The wage indicators in the survey “are starting to challenge the RBNZ’s forecast that wage inflation will be flat or ease this year”, Zollner said.
Overall, the survey found business confidence fell to a four-month low in February. The gauge has retreated from a 30-year high in December as lenders raised interest rates in response to higher global funding costs and expectations the RBNZ had finished its easing cycle, Zollner said. BLOOMBERG
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