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Labour Markets

New Zealand has a decentralised labour market. Enterprise bargaining predominates in the negotiation of the terms and conditions of employment. The Employment Relations Act 2000 provides the statutory framework that supports the building of productive employment relationships. The legislation protects the integrity of individual choice in terms of freedom of association and union membership and the choice of collective and individual employment agreements. It also promotes collective bargaining, requires the parties to employment relationships (unions, individual employees and employers) to deal with each other in good faith and promotes mediation to assist in the early resolution of workplace disputes.

In 2010, the government made several amendments to the Act in order to increase choice and flexibility, ensure the balance of fairness between employers and employees is appropriate for both parties, improve the operation and efficiency of the Prices and Costs legislation and reduce its compliance costs.

A set of minimum employment standards also underpins employment relationships and protects the more disadvantaged in the workforce. Relevant legislation includes the Minimum Wage Act, the Equal Pay Act, the Holidays Act and the Parental Leave and Employment Protection Act.

Employment grew strongly prior to 2009, with annual growth averaging 2.4% over the four years to September 2008. During 2009, the lagged effects of the weakening economy flowed through to lower demand for labour, with employment contracting 2.3% in the year to December 2009.

As the economy cooled, the unemployment rate increased sharply from a record low of 3.5% in December 2007 to 7.0% in December 2009. Since then, the unemployment rate has fluctuated between 6.1% and 6.9%, in part due to a volatile participation rate. In the September 2011 quarter, the unemployment rate was at 6.6%. The Canterbury earthquakes have had a negative impact on the labour market, with employment falling 8.0% in the region in the year to September 2011. Despite this, employment overall was up 1.1% in the year to September 2011. As the Canterbury rebuild gets underway, employment is expected to pick up more substantially.

Annual growth in labour productivity peaked in March 2008 at 3.0% before contracting by 1.9% in March 2009. Productivity rebounded in the year to March 2010 (up 2.1%) as employers absorbed underutilised labour. Productivity growth remained positive throughout 2010 as firms' demand for labour began to reflect the pick-up in economic activity, but was negative in the first two quarters of 2011. It is expected to improve in 2012 and 2013, as the economy recovers and Canterbury rebuild gets underway.

New Zealand's relatively high rate of job turnover and of firm creation and destruction suggests that there are few regulatory and institutional impediments to employment, investment and innovation. Government policy is directed to building up skill levels in the workforce and to addressing skill shortages.

Figure 3 - Employment/Unemployment
Figure 3 - Employment/Unemployment.
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