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The salary and wage rates component of the labour cost index (LCI) measures movements in base salary and ordinary time wage rates and overtime wage rates. The non-wage component measures changes in the following costs:
- annual leave and statutory holidays
- ACC employer premiums
- medical insurance
- motor vehicles available for private use
- low interest loans.
The LCI sits alongside the producers price inputs index (which measures changes in businesses’ current costs of production, excluding labour and capital costs, as defined by the New Zealand System of National Accounts' concept of intermediate consumption) and the capital goods price index (which measures changes in businesses’ capital costs).
This is best shown in the diagram here.
These three indexes provide measures of the extent to which changes in businesses’ input costs put pressure on the output prices they charge for goods and services. Information from the Annual Enterprise Survey indicates that labour costs account for about 16 percent of employers’ total expenditure (including depreciation).