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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 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. In 2012, the Minimum Wage Act was amended to introduce a 'starting-out' wage. This change came into effect on 1 May 2013.

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 slowed, the unemployment rate increased sharply from a record low of 3.5% in December 2007 to 6.9% in December 2009. The unemployment rate fluctuated between 6.2% and 7.2% until 2012, in part owing to a volatile participation rate. Since the September quarter 2012 the unemployment rate has fallen from 7.2% to 6.0% in December 2013, with strengthening employment growth and an increasing participation rate. The positive outlook for the New Zealand economy points to a continued reduction in unemployment in future years.

The Canterbury earthquakes initially had a negative impact on the labour market, with employment falling 8.3% in the region in the year to December 2011. Despite this, employment overall was up 1.6% in the year to September 2011. More recently, labour market statistics for Canterbury have strengthened with employment rising 4.5% since the December quarter 2011. As the Canterbury rebuild gathers pace, employment is expected to pick up more substantially.

Annual growth in labour productivity peaked in March 2008 at 4.3% before contracting by 3.1% in March 2009. Productivity growth rebounded in the year to March 2010 (up 3.9%) as employers absorbed underutilised labour, but remained negative for most of 2010 and 2011. The decline in annual productivity growth coincided with soft GDP growth over this period, which restrained firms' demand for labour. Modest GDP growth and weak employment growth saw labour productivity grow strongly over 2012 with annual growth reaching 4.6% in the year to September 2012. Stronger growth in employment and hours paid, at the same time as slower GDP growth, led to falls in productivity growth of 0.2% in the year to the June quarter 2013.

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.

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