RBNZ's wage inflation considerations, the budget key this week - ANZ

As the RBNZ was at pains to point out in last week’s Monetary Policy Statement, wage inflation is weak and weaker than one might have expected given the conditions in the labour market, even given the subdued inflation environment. 

Key Quotes:

"We expect that wage inflation will increase from here.

But with underemployment elevated, participation on an upward trend, and overseas workers readily available, we are open to the possibility that there may be more spare capacity in the labour market than the unemployment rate would suggest – and that this could weigh on wage inflation going forward."

"The Budget is the key event this week: we expect strict adherence to the fiscal targets, but with upside revenue surprises and spending reprioritisation perhaps allowing a few cheap lollipops."