NZ Unemployment Rate Lower Than Forecast, Signalling Early Signs of Recovery

Finance Minister Nicola Willis has welcomed the latest labour market figures showing that unemployment in New Zealand is tracking slightly better than expected—signalling tentative steps towards a broader economic recovery.

Labour Market Stronger Than Anticipated

According to data released today by Stats NZ, the national unemployment rate for the June 2025 quarter stands at 5.2%, a modest but meaningful improvement over the 5.4% figure previously forecast by the Treasury in its Pre-election Economic and Fiscal Update (PREFU). The difference represents around 8,000 fewer unemployed people than anticipated.

“This is a promising development,” said Finance Minister Nicola Willis, “particularly as it suggests that our economy is showing resilience in the face of persistent global headwinds and the domestic aftershocks of recent inflationary pressures.”

Challenges Still Evident, But Direction Improving

Despite the improvement, Minister Willis acknowledged that rising unemployment remains painful for many New Zealanders.

“Rising unemployment is tough on every New Zealander impacted and is the unfortunate after-effect of a historic period of out-of-control inflation, rapidly rising interest rates and stagnant growth,” she said.

The current unemployment rate reflects a labour market under stress, but not in freefall. While a rate above 5% typically signals economic weakness, it is noteworthy that the job market is stabilising ahead of Treasury's worst-case scenario.

Government’s Plan for Job Creation and Growth

Minister Willis pointed to early signs of economic stabilisation, including:

• Inflation dropping back to 2.7%, within the Reserve Bank’s target range.

• Interest rates beginning to ease following aggressive tightening cycles.

• GDP growth recorded in the first quarter of the year.

In addition, the Government has laid out several initiatives aimed at accelerating job creation and economic momentum:

• $6 billion in government-funded construction projects to commence before Christmas, promising job creation across the infrastructure sector.

• Fast-track consenting and regulatory reforms to stimulate business activity.

• Growing exports which help fuel economic resilience.

• A newly announced Investment Boost tax policy, designed to incentivise businesses to invest in productivity-enhancing technologies and workforce expansion.

“These policies are all designed to create the right conditions for more and better-paying jobs,” said Willis. “We are committed to making New Zealand a place where businesses feel confident investing.”

Wages Outpacing Inflation

Another highlight from the labour market data is that average hourly earnings rose 4.5% over the past year, outstripping the 2.7% inflation rate. This increase was largely driven by growth in the private sector wage base, an encouraging signal for household purchasing power and cost-of-living pressures.

The wage growth suggests that while some workers have lost jobs, those remaining in employment are seeing real wage improvements. This, in turn, supports domestic consumption and contributes to the broader recovery effort.

Context: A Difficult but Stabilising Period

The slight improvement in unemployment is significant against the backdrop of a tough economic period. New Zealand, like many advanced economies, has been managing the fallout from the COVID-19 pandemic, global supply chain disruptions, and an extended inflationary cycle triggered by both domestic and international pressures.

In the face of these challenges, the Government’s focus has shifted from emergency interventions to long-term, sustainable economic rebuilding. Today’s data adds weight to the argument that this transition is beginning to bear fruit.

Looking Ahead

While cautious optimism is warranted, both the Government and independent economists warn that risks remain. Global volatility—including conflict in trade routes, climate shocks, and geopolitical uncertainty—could still weigh on New Zealand’s export-driven economy. Domestically, any uptick in unemployment or inflation will be closely watched by both policymakers and the public.

Still, the message from the Beehive is clear: the worst may be behind, and recovery—albeit uneven and gradual—is underway.