Do I have to buy that extended warranty?

If you've felt like it's getting harder to keep up with the cost of everything, you're not wrong.

Data released on Wednesday by Stats NZ shows that most New Zealanders aren't getting pay increases that keep up with the rate of inflation.

Across all sectors, labour cost index data showed salary and wage rates were up 2 percent over the year to June, and 0.6 percent compared to the previous quarter.

The average ordinary time hourly earning is now $44.62, according to the Quarterly Economic Survey.

Average weekly earnings including overtime for full-time equivalent employees increased to $1730.

The private sector was up 2 percent annually and the public sector 1.7 percent.

Across the industries, wood and paper products manufacturing had the largest annual increase up 3 percent, followed by mining, local government administration, arts and recreation services and the group Stats NZ refers to as "other services" all up 2.5 percent.

Transport postal and warehousing, financial and insurance services and administrative and support services were up 2.3 percent.

Retail trade and accommodation had a 1.8 percent increase, construction wages were up 1.6 percent and electricity, gas, water and waste services were up 1.2 percent.

Kiwibank economist Alexandra Turcu said wages were going backwards compared to an annual inflation rate of 4.1 percent. "The cost of things has increased twice as much as the wages that the average Kiwi is getting."

She said inflation had started outpacing wage growth just after Covid hit New Zealand. "We really haven't had a reversal stick around for very long. We had a few quarters in about 2024 where wages started to outpace inflation for a little bit but it didn't last. It's really been weighing on Kiwi consumers for a long time."

Simplicity chief economist Shamubeel Eaqub agreed. He said while average take-home weekly pay was going up it was often because people were working more hours. "If you've had the same job over the last year then your real income has fallen by 2 percent."

He said data such as the ANZ consumer confidence survey showed people had been feeling "persistently negative" about their finances for the last few years. "I think that's what we're seeing, that sustained feeling of being under pressure because people's purchasing power has been eroded. So much of the inflation has been about necessities, which really erodes people's purchasing power."

ANZ senior economist Matthew Galt said using the Quarterly Employment Survey, average hourly earnings were up 2.8 percent over the year. This measures what employees receive, including the effect of things like promotions or additional hours, while the labour cost index measures the cost of a unit of labour for an employer.

He said, by this measure, wages had increased faster than inflation on average since 2020 but by less than was typical before the pandemic. "Real wages have risen by an average of 0.8 percent per year since 2020 compared with 1.1 percent in the two decades before 2020.

"There have been two periods in recent years where inflation has outpaced wage growth: first in 2021 and 2022 when inflation surged, and again over the past year as higher fuel prices have pushed inflation higher. Periods of high inflation since 2021 - including for many necessities, together with a softer labour market, are likely contributing to the sense of ongoing cost-of-living pressures."

Turcu said inflation was being pushed up by the conflict in the MIddle East. "Once that's resolved we're likely to see those cost pressures come off and prices come back down or at least not increase as quickly any more. That can give time for wages to catch up."

Eaqub said things would only improve when the labour market was sufficiently strong that the bargaining power for wages moved from employers to employees. "We're not there yet. There is a huge pool of people who are currently unemployed and there is very few vacancies. It's still Hunger Games, in terms of looking for jobs. And when you're desperately looking for a job it's very hard to secure big increases in pay. Also because the businesses don't have the money to pay. It's not like profitability is booming."

Stats NZ said 46 percent of pay increase in the year to June were attributed to the cost of living, compared to 41 percent last June.

Only 21 percent were because employers were matching market rates and 13 percent were because they needed to retain staff.

Westpac chief economist Kelly Eckhold said that was probably something that would alarm the Reserve Bank. "It suggests that people's inflation expectations have increased to the extent to which they're going to their employer and saying 'well I need a cost-of-living adjustment' and that is the mechanism by which second-round type impacts on inflation occur."