Jan 30, 2023
Bartender Sign-on Bonuses Highlight RBNZ’s Rate-Hike Dilemma
(Bloomberg) -- New Zealand restaurateur Kieran Turnbull is so desperate for staff he’s offering sign-on bonuses to lure the bartenders, chefs and waiters he needs to keep his outlets operating.
The chief executive of Nourish Group, which owns high-end restaurants in Auckland, Wellington and Queenstown, will pay new employees NZ$1,000 ($650) or more just to take the job.
“The incentive allows our positions to stand out in a cluttered job marketplace,” said Turnbull. “It’s not only hospitality businesses looking for staff, but adjacent industries which recognize the great skill and talent that hospitality workers have.”
Employers across the country are competing for workers amid a labor shortage that’s driving up wages, fueling inflation and forcing the central bank to raise interest rates at a record pace. Labor market data Wednesday may show that unemployment held near a record-low 3.3% in the final three months of 2022.
That would pile pressure on the Reserve Bank to keep tightening aggressively even as the economy risks tipping into recession this year.
It’s a conundrum confronting economies in the Northern Hemisphere as well. Strong job markets helped prop up consumption and offered the prospect of avoiding recession. But the associated surge in wages is fanning fears that rates will need to rise higher, or at least remain elevated for longer.
New Zealand’s annual wage inflation, which accelerated to a record 3.8% in the third quarter, may have topped 4% in the final three months of last year, according to some economists.
The nation closed its border for more than two years during the pandemic, stopping the flow of migrant workers that many industries relied on. As the economy recovered, the lack of fruit-pickers, hotel cleaners and restaurant servers hit businesses hard.
In the North Island town of Hastings, the Splash Planet amusement park is closing for the season in early February rather than late March. Like many businesses, it relied on student workers who are soon returning to schools and universities.
“We do not have enough staff to run the park safely,” the company said on its website. “Although we have continued to recruit through summer, due to the worker shortages” not enough qualified and trained staff could be found.
New Prime Minister Chris Hipkins said last week that finding workers was at the top of the list of issues worrying businesses.
The central bank in November forecast the tight labor market would fan inflation in early 2023, requiring it to raise the Official Cash Rate to 5.5% by mid-year even as it anticipates the economy will enter recession.
A net 68% of firms in a survey by the New Zealand Institute of Economic Research say it is harder to find skilled workers. Yet companies are also worried about the future state of demand, it said, meaning many are growing more cautious about hiring.
Investors have also become less certain that the RBNZ will need to raise rates so high after fourth-quarter inflation came in slower than the central bank expected.
The RBNZ’s next policy meeting is on Feb. 22, with economists split between forecasting a 75 basis-point hike or a half-point adjustment.
“February’s monetary policy decision is a line-ball call,” said Stephen Toplis, head of research at Bank of New Zealand in Wellington. “We still want to see what the labor market data look like before deciding which way we will lean.”
©2023 Bloomberg L.P.