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Labour Markets

New Zealand has a decentralised labour market. 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 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.

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, addressing skill shortages and incentivising welfare beneficiaries to seek employment.

Employment contracted significantly in 2009 as weakness in the economy led to lower demand for labour. As a result, the unemployment rate increased sharply from a record low of 3.4% in December 2007 to around 7.0% at the start of 2010. The unemployment rate fluctuated between 6.2% and 7.2% until 2012, in part owing to a volatile participation rate. The unemployment rate fell to 5.6% in the September quarter 2014 as the economy picked up. Employment also grew strongly, up 3.2% over the previous year in the September quarter. This occurred despite increasing labour force participation, which remains elevated. Employment growth weakened in mid-2015 as economic growth slowed, falling to 1.5% in the year to September quarter 2015, and the unemployment rate increased to 6.0%.

The Canterbury earthquakes initially had a negative impact on the labour market, with employment falling 4.7% in the region in the year to September 2011. The Canterbury labour market strengthened considerably over 2013 and 2014, with total employment up by 4.8% and 6.0% respectively and the unemployment rate declined to 3.2% in 2014 from a peak of 5.5% in 2012.

Labour productivity contracted 2.2% in the year to March 2009 but then rebounded by 5.4% in the year to March 2010 as employers absorbed underutilised labour. Productivity contracted again for a large part of 2011 reflecting soft GDP growth, which restrained firms' demand for labour. Weak employment and a pick-up in GDP saw labour productivity grow strongly over 2012, with annual growth reaching a post-recession peak of 4.1% in December 2012. However, growth stalled again in 2013, as employment strengthened, and eased by 1.2% in the year to June 2014, but increased by 0.4% in the year to June 2015.

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