Australia’s Q3 wages rise at the slowest pace since late 2022
AUSTRALIAN wages rose at the slowest annual pace since late 2022 in the third quarter amid an influx of new workers and an easing in inflation, adding marginally to the case for an eventual cut in interest rates.
Figures from the Australian Bureau of Statistics on Wednesday showed its wage price index rose 0.8 per cent in the September quarter, unchanged for three quarters now. That compared with market forecasts for a 0.9 per cent rise.
Annual pay growth slowed to 3.5 per cent, from 4.1 per cent, the lowest reading since the last quarter of 2022, mostly due to base effects from the large rise last year.
Growth in the private sector rose 3.5 per cent in the quarter, with public wages up 3.7 per cent.
“There are some signs that wage pressures are easing, but only at a very gradual pace,” said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.
“The labour market continues to operate in a tight position, which is generating relatively strong wage growth. The RBA will view quarterly wage growth of 0.8 per cent q/q as sustainable only if productivity growth improves.”
The Reserve Bank of Australia has held its policy steady for a year now, judging the current cash rate of 4.35 per cent - up from the 0.1 per cent during the pandemic - is restrictive enough to bring inflation to its target band of 2-3 per cent while preserving employment gains.
It expects wage growth to slow gradually to 3.4 per cent by the year end and 3.2 per cent by the end of 2025, but much will depend on a pick-up in productivity, without which the gains in labour costs would still be adding to inflation.
Meanwhile, the overall labour market has stayed resiliently strong, with job growth up 3.1 per cent over the past year, twice the US rate, and jobless rate staying low at 4.1 per cent. In a Westpac survey on Tuesday, job loss fears among consumers fell to a 19-month low.
That is one reason that policymakers do not see inflation sustainably returning to target in 2026. Headline inflation ran at 2.8 per cent last quarter thanks to the government’s temporary energy rebates, while core inflation ran at a higher 3.5 per cent.
Markets see scant chances of a rate cut until May next year, which is 73 per cent priced for a quarter-point move. The first easing is only fully priced until August. REUTERS
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