An employers group says the pressure is still on for employers with unemployment remaining low - but ASB predicts relief is on the way.
Statistics NZ figures released on Wednesday showed the unemployment rate remained unchanged in March at 3.4 percent (102,000 people out of work).
Labour's Finance Minister Grant Robertson said the figures are a "positive result" as New Zealanders are in paid work in record numbers, while wages are outpacing inflation.
The distributional figures showed 67 percent of jobs had annual wage increases (up one percent from last quarter). Of the jobs, 17 percent saw increases between 3-5 percent whereas a record 39 percent saw increases greater than 5 percent.
"We've created 281,000 jobs since 2017, the unemployment rate is near record lows and wages are growing. This is the best response to New Zealanders dealing with cost of living pressures," Robertson said.
But the Employers and Manufacturers Association (EMA) said the low unemployment rate, coupled with wage rises is putting immense pressure on businesses.
"Those skills and people shortages are a significant handbrake of economic recovery, growth and productivity and we'll be looking to the Budget in a couple of weeks to see if there are measures to support productive growth," EMA head of advocacy and strategy Alan McDonald said.
McDonald said low unemployment and a mismatch in the skills being allowed through the migration channel were still a "significant issue".
He said the EMA's recent Skills Shortage Survey showed work readiness of those coming into the workplace for the first time is a major problem, and nearly 90 percent of employers with vacancies were struggling to fill them.
"While migration numbers have increased rapidly there is a still an imbalance in the system that weighs more heavily towards university and white collar qualifications than technical and vocational skills," McDonald said.
"That's led to a situation where we have members who can't take on apprentices because they have run out of skilled people to train them, or they can't expand the business because they don't have enough skilled people to meet any increase in orders."
McDonald said greater encouragement to invest in new tech, machinery and training was key to increasing productivity and lifting people entering or already in the workplace into higher-paying roles.
"Similarly, greater recognition and support for vocational education and training in the workplace is a key to boosting both productivity in the economy and skill levels in our workplaces. And we'd really like to see a continuation of support for schemes like Apprenticeship Boost."
Turning point on the horizon?
One of New Zealand's major bank's said while the labour market is still "extraordinarily tight", a turning point looks to be close with demand for workers set to weaken.
ASB said it expects growth in the working-age population and labour force to strengthen by the end of the year given the strong pick-up in net immigration to New Zealand.
"Both of these drivers will act to push the unemployment rate to around 5.5 percent by late next year, with employment moving below its maximum sustainable level," ASB said.
"Wage growth is expected to decline next year as labour market capacity picks up and workers compete for less plentiful work."
In the short term, ASB expects the Reserve Bank of New Zealand (RBNZ) to increase the Official Cash Rate (OCR) by 25 basis points in May to a 5.5 percent peak this cycle.
ASB said the OCR will not be cut until the RBNZ is confident there is sufficient slack in the labour market that will see annual inflation settle in the 1-3 percent target range.
"We expect OCR cuts to commence from mid-2024 and view current market pricing (which includes 25bps of cuts by year-end and more than 150bps of cuts by late 2024), as being a tad premature."
