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Labour Hammers Govt Over `Shocking' Unemployment Rate

Fuseworks Media
Fuseworks Media
Phil Goff
Phil Goff

Wellington, Feb 5 NZPA - Prime Minister John Key's message is "don't panic" but the Labour Party is pouring criticism on the Government over the highest unemployment rate in a decade.

Yesterday's Household Labour Force Survey showed unemployment running at 7.3 percent in the December quarter, up from 6.5 percent and higher than the Government had expected.

Labour leader Phil Goff said 168,000 unemployed Kiwis was "a shocking indictment" of the Government's failure to look after New Zealand families.

"The Government's stimulus package has produced just 2300 jobs," he said.

"That is a lot less than the 3500 people who queued for hours last month for the chance to grab just 150 jobs at a new South Auckland supermarket."

Mr Goff said Australia's unemployment rate was 5.6 percent, nearly two percentage points lower than New Zealand's.

"Australia was serious about stimulating the economy to get through the downturn," he said.

Labour's Maori Affairs spokesman, Parekura Horomia, said Maori unemployment was up from 14.2 percent to 15.4 percent.

"That's a total of 24,900 Maori without jobs...these rates are shocking," he said.

"If these figures aren't a wake up call for John Key and the Maori Party, I don't know what is."

Mr Key said the unemployment rate was a slow statistic to improve.

"It is very important people don't panic because they see an unemployment number rising. It is a rearward looking figure, it always lags behind what is happening in the real economy," he said.

Mr Key said he believed the data showed people weren't losing their jobs, but more people were looking for work and the economy was not creating jobs fast enough to meet the demand.

"I think we are likely to be very close to the peak," he said.

"If we are not at the top then it may be one more quarter, but we are getting somewhere near the top."

Social Development Minister Paula Bennett said employment schemes were working well and pointed to an increase of 14,500 people in the working age population.

"There are simply more people joining the workforce, which is outstripping job growth," she said.

The shock spike in the rate pushed the New Zealand dollar down and caused economists to back off predictions of interest rate hikes.

"Importantly, the RBNZ was looking for an unemployment rate of just 6.6 percent and a peak of only 6.7 percent. Clearly this prediction has been blown out of the water," BNZ economists said.

Yet BNZ said the data was consistent with a recovering economy. A net 2000 people lost their jobs in the December quarter compared to an average of 17,000 a quarter over the previous nine months.

An unexpected rise in the labour force participation rate helped boost the number of job seekers. The labour force participation rate increased by 0.1 percentage points to 68.1 percent during the latest quarter.

Strong migration flows were bolstering the number of people in the labour force and the participation rate was high for a recession, BNZ said.

"The weakness in today's data raises the real possibility that the RBNZ waits beyond June to begin the tightening cycle," said Philip Borkin, economist at Goldman Sachs JBWere.

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