Australia's record-low wages growth cements lower-for-longer rate view
[SYDNEY] Australian wages grew at the slowest pace on record last quarter, data on Wednesday showed, pointing to the mountainous challenge policymakers face in boosting inflation to desired levels.
The official wage price index rose 0.6 per cent in the three months to end December, the Australian Bureau of Statistics (ABS) reported, double what analysts had forecast.
Annual wage growth slowed to 1.4 per cent, the weakest pace on record but better than forecasts for a 1.1 per cent rise.
The stronger-than-expected outcome was influenced by businesses rolling back short-term wage reductions, returning salaries to pre-Covid levels, the ABS said.
A phased implementation of the Fair Work Commission annual wage review also had a small positive impact, it added.
Still, the Reserve Bank of Australia (RBA) will need to keep policy accommodative for a long time to come as it believes wages growth will need to be above 3 per cent for inflationary pressures to emerge.
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Inflation has undershot the RBA's 2-3 per cent target for a number of years and the central bank's forecasts suggest consumer prices won't hit the range for another two years.
The RBA slashed interest rates three times last year to 0.1 per cent and launched a massive quantitative easing programme to lower borrowing costs and boost inflation and economic growth.
The stimulus has lit a fire in the country's housing market, boosted consumer and business confidence, and lifted jobs growth and household consumption.
But that was still not enough to lift Australia's wages growth to the desired level of above 3 per cent, a problem plaguing the country for nearly the past decade.
"Australia requires a number of years of outstanding employment growth to create an environment that generates strong wage growth," said Callam Pickering, economist at global job site Indeed.
"While wage growth will improve throughout 2021, it is likely to remain below pre-crisis levels and weigh upon consumer spending and economic growth more broadly."
REUTERS
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