N.Z. unemployment drops to 14-year low


New Zealand now has 1.878 million people in work

SYDNEY, Australia (CNN) -- New Zealand's unemployment rate continues to inch downwards, falling to a 14-year low of 5.1 percent.

The June quarter figure was the lowest since March 1988, when it stood at 4.8 percent, the government's data-gathering agency, Statistics New Zealand, said Thursday.

The official figure was slightly lower than the March rate, and just below market forecasts of a 5.2 percent figure.

Among OECD countries, New Zealand's unemployment levels have improved from 12th in the March quarter to tenth, equal with Britain.

For the quarter, seasonally adjusted employment was up by 0.6 percent, a rise of 11,000 workers. Annually, there was an increase of 3.1 percent or 57,000 people in employment, meaning there are now 1.878 million people in work.

This was down slightly on economists' expectations, who predicted a quarterly rise of 0.8 percent and an annual employment growth rate of 3.2 percent.

Deutsche Bank predicts that while a further small decline in the unemployment rate is possible over the next six months, over the longer 12 to 18 month period an upward trend in unemployment will soon take hold.

"It remains our interpretation that, in absolute terms, the economy is continuing to operate at or above its sustainable productive capacity," Deutsche Bank said in a report.

With unemployment down, and inflation pressures relatively subdued, economists say it is unlikely New Zealand's central bank will raise interest rates when it meets on August 14.

In July the Reserve Bank of New Zealand lifted rates a quarter of a percentage point on the back of "outstanding growth" and consequent inflation risk. But at the time the central bank downplayed the need for further rate rises.

Deutsche Bank says any residual 'excess' strength in the economy should be welcomed by the Reserve Bank and predicts that rates will remain at the current 5.75 percent for "quite some time."

Full-time employment was the big winner in June, growing 1 percent over the quarter, while part-time work fell by 1.2 percent.

Unemployment remains highest among the 526,000 indigenous Maori population, which recorded a rate of 11 percent, while 9.7 percent of the country's Pacific islanders are out of work.