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New Zealand Jobless Rate Dives, RBNZ Expected to Raise Interest Rate -- Update

08/03/2021 | 05:47pm EDT

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By Stephen Wright

WELLINGTON, New Zealand--New Zealand's jobless rate fell to 4.0% in the second quarter as local employment was boosted by economic stimulus brought on by the pandemic and a shortage of migrant workers because of the closed border.

The drop in the unemployment rate from 4.6% in the first quarter is likely to add to expectations that the Reserve Bank of New Zealand will raise its cash rate from a record low 0.25% this month to head off rising inflation. The median forecast in a Wall Street Journal poll was for a 4.4% unemployment rate.

The statistics agency said the fall in joblessness was consistent with other indicators such as declining numbers of welfare recipients and reports that businesses are having difficulty finding enough workers.

Policy responses to the pandemic have engineered a strong economic bounceback from a strict lockdown in March-May last year, but also turned remote New Zealand's economy into a pressure cooker.

Increased government spending and record-low interest rates have inflated house prices and boosted consumer demand, while the closed border has deprived industries from construction to fruit-growing of sufficient workers.

Businesses are engaged in a "relentless scraping of the barrel for available workers," said Kiwibank chief economist Jarrod Kerr.

The drop in the jobless rate "all but confirms a rate hike from the RBNZ in August," he said.

Write to Stephen Wright at stephen.wright@wsj.com

(END) Dow Jones Newswires

08-03-21 1947ET

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