Unemployment rate: 4.8% (prev: 4.6%, Westpac f/c: 5.0%, RBNZ f/c 5.0%)

Employment change (quarterly): -0.5% (prev: +0.2%, Westpac f/c: -0.6%, RBNZ f/c -0.4%)

Labour costs (private sector, quarterly): +0.6% (prev: +0.9%, Westpac f/c: +0.7%, RBNZ f/c +0.7%)

Average hourly earnings (private sector, ordinary time quarterly): +1.1% (prev: +1.4%)

New Zealand’s labour market continues to soften, in line with the shallow drawn-out recession we have been experiencing over the last couple of years. The unemployment rate rose from 4.6% to 4.8% in the September quarter, the highest level since December 2020.

This was a smaller rise than we and the Reserve Bank had been expecting, with the miss being entirely due to a sharper than expected fall in the labour force participation rate. This reflects an ongoing unwind of the pressures that had built up in the labour market in previous years.

The number of people employed fell by 0.5%, roughly in line with what the Monthly Employment Indicator (MEI) had signalled. In fact, the various employment measures were unusually in agreement this time, with the Quarterly Employment Survey (QES) also showing a 0.3% fall in filled jobs and full-time equivalent employees.

While these job losses did lead to a rise in unemployment, there was also a large number of people who exited the labour force altogether. The participation rate fell from 71.7% to 71.2% in the September quarter, its lowest level in over two years – we had assumed a fall to 71.4% in our forecast.

The fall in participation appears to have been strongly concentrated among young people (15-24 years old). In the initial post-Covid period, the economy was running hot and the border closure meant that migrant workers weren’t available. In this time, many young people were drawn into the labour force to fill the gap – often at the expense of study. As the economy has slowed and migration has rebounded, this group has been at the forefront of job losses. While this has led to a rise in the number of unemployed, we’re also increasingly seeing young people return to or remain in study, ending their job search altogether. Indeed, the NEET ratio (young people not in employment, education or training) has actually fallen over the last few quarters.

Turning to wages, the Labour Cost Index (LCI) rose by 0.6% for the quarter, slightly lower than the 0.7% that we and the RBNZ expected. Public sector wages were up by 0.9%, boosted by a pay increase for police, but this didn’t have an impact on the overall results. The unadjusted analytical LCI (which doesn’t exclude pay increases that are related to productivity) rose by 0.9%, the smallest quarterly increase since March 2021.

So what does this mean for the RBNZ? We think not much – it simply highlights the degree of flex that there is in the labour force as economic conditions change. The bottom line is still that employers are shedding workers, and wage pressures are easing accordingly. That’s consistent with the view that inflation pressures are being reined in and that monetary policy no longer needs to be as restrictive. But we don’t think that there’s anything in the figures that would shift the RBNZ’s thinking for its next policy decision at the end of this month.

We are crossing the planetary boundary on biodiversity even more than for climate, a fact that is increasingly being acknowledged in boardrooms and among policymakers.

The World Economic Forum (WEF) sees biodiversity loss as one of the biggest global risks. Similar to climate change, market interventions are needed to halt the decline in species diversity. Sometimes this comes at a price.

The recent COP16 biodiversity summit in Colombia left many disappointed as countries failed to agree on mobilising essential funding for nature conservation. However, interventions beneficial to biodiversity do not always have to be expensive for consumers and society.

Consume differently

There are several ways to slow down biodiversity loss. Better protection of existing nature is one way to preserve species diversity. Other methods include altering production processes while maintaining the same products or opting for alternative, less harmful products, which aligns with the concept of green growth. Consuming less is also an option and is more in line with degrowth. In particular, adaptations aimed at consuming differently and less do not have to cost a lot of money.An example from the food industry can illustrate this. Food production is estimated to account for 30% of global biodiversity loss, primarily due to land conversion for agriculture and overfishing. Additionally, the sector faces significant drawbacks from reduced biodiversity, such as the decline in bee populations affecting pollination, which in turn hampers the ability to harvest fruits like apples and pears.

To stop this, it is good to start at the end of the chain; the consumer. The negative impact of meat, fish and cheese on biodiversity is much greater than that of other foods. The production of beef, for example, requires a relatively large amount of land, at the expense of space for other animals and plants. But coffee and chocolate also have a relatively large impact on biodiversity, because these products are grown in places where the original species diversity is very high. So, the product the consumer chooses certainly matters.

Beef, chicken, pulses

Switching from beef to chicken is a small step that already makes a big difference to biodiversity. However, when it comes to animal welfare, the consumer must go a step further. Of course, supermarket shelves are teeming with plant-based meat alternatives. These are more animal-friendly, less harmful to biodiversity and often cheaper, such as pulses and mushrooms.

Some critics will argue that animal products are an important source of nutrients, such as protein. That's true, but the average Western consumer is more likely to consume too much of these nutrients than too little. From a health point of view, many national nutritional guidelines indicate that the average consumer is better off with less red and processed meat.Western consumers are used to enjoying meat, coffee, and chocolate daily, and they can afford it. The challenge for policymakers and companies is to change this consumption pattern. Creating awareness in a positive way is the first step.

The World Wildlife Fund has collaborated with numerous European retailers to tackle issues such as biodiversity loss. Recently, it launched a campaign with a major retailer where children could collect cards featuring endangered animals to raise awareness about their importance. However, it’s unlikely that these children will immediately influence their parents to change their purchasing habits.

At the macro level, we do not see that greater awareness automatically leads to structurally different consumption behaviour. Meat consumption in the EU has been fairly stable since the 1990s. In short, letting the market do its work does not always lead to the desired outcome.

Market interventions

More guidance is therefore needed. For example, by rewarding farmers with subsidies for activities that are positive for biodiversity. This might be in the form of farmers receiving money from the European Union if they preserve landscape features such as hedges and trees on their land. In this way, EU taxpayers contribute indirectly to biodiversity.

The EU's deforestation law also enforces a different way of production. Because of this, deforestation-free products will become the norm. Compliance with that standard increases the production costs of farmers and food processing companies. By reducing deforestation, production becomes less harmful, while a higher price discourages consumers from using products with a high biodiversity impact. Because there are cheap alternatives for the consumer, this does not have to be expensive for society.Biodiversity loss, on the other hand, is an expensive problem. To describe this as 'yet another cost' is an inaccurate reflection of the economic task at hand. This certainly applies to the food sector, which is one of the most dependent on nature. For example, monoculture agriculture and livestock farming make the sector more vulnerable to pests and diseases. Combating this is costly. The same goes for pollination of our crops, which will be very pricey if there are no more bees and other insects that take care of it for free. If biodiversity is not in order, food will become very expensive in the long run, not only affecting the sector but also the consumer.