Growth in wages will support cost of living pressures
With a strong labour market, wages are growing which will help working New Zealanders to support themselves and their families amid the current cost of living pressures. While real wages had been growing at close to 2 percent per annum in the years leading into the pandemic, the recent surge in inflation has seen real wages decline, with a return to positive real wage growth expected from 2023 onwards (Figure 7).
New Zealand has been through previous periods where CPI inflation exceeded wage growth for a time-period. For example, in the 2010 and 2011 fiscal years, the CPI was higher than growth in average hourly earnings. In the Budget Update, Treasury forecasts only one fiscal year in which inflation is higher than wage growth - 2021/22.
Figure 7 - Nominal and real wage growth
Sources: Stats NZ, The Treasury