The RBNZ was the first G10 central bank to start hiking rates and has been
aggressive with its rate hikes. The central bank has been hiking in 50bp increments
since April. But the main issue with the NZ economy is not only its strength, but its
limited productive capacity. While the economy’s international border has reopened,
there has so far been only a modest recovery in net migration. The NZ
economy is significantly dependent on temporary and part-time workers in the
forms of backpackers and students. NZ’s labour force participation has been on
the rise, but has so far failed to alleviate the inflation pressures in the economy.
While there was a large rise in in Q3, it was not enough to push the unemployment
rate higher, which was stable at a record low of 3.3%. Employers are still desperate
for staff and increased their work forces by a large 1.2% QoQ. Wages growth also
remained rapid and hit 3.8% YoY. All this adds up to the RBNZ hiking rates
aggressively again in November. The market was already strongly priced for a
75bp rate hike by the RBNZ, however, so we anticipate little impact on the NZD
from the labour market data.