Australia’s annual wage growth remained elevated in the year to September, highlighting ongoing labour cost pressures and raising questions about inflation and monetary policy, the Australian Bureau of Statistics (ABS) reported Wednesday. With this situation in place, analysts have concluded that inflation pressures may take longer to subside.
The figures were released by the ABS on November 19, indicating that the Wage Price Index rose by 3.4% over the year in the three months ending in September. Interestingly, these results aligned with what economists had earlier predicted.
Australia’s annual wage rises
Reports mentioned that Australia’s annual wage climbed by 0.8% from the previous quarter. The reports also mentioned that wages in the public sector surpassed those in the private sector.
This was issued as the Reserve Bank of Australia (RBA) continued to tread carefully and drew on available data after having opted to reduce borrowing costs three times this year to 3.6%. It is worth noting that this percentage represents the lowest rate since April 2023.
Currently, the Reserve Bank pays attention to potential additional cuts because the job market is tight and productivity growth is slow. The bank also revealed that it is monitoring how businesses determine their prices, given that unemployment is at near-record low levels, inflation is indicating signs of increasing again, and consumer spending is stronger than expected.
As recently reported by Cryptopolitan, Consumer confidence in Australia escalated substantially in November as households began to look on the positive side of the economy.
The news followed Westpac Banking Corp.’s release of its survey results, which showed a 12.8% increase in sentiment to 103.8 points. It was the first time since February 2022 that 100 passed a threshold, breaking a 44-month period in which Australian consumers felt negative emotions.
“This is an amazing and somewhat unexpected outcome. November is the first month in nearly four years where consumer sentiment is ‘net positive,’” explained Matthew Hassan, who leads Australian macro forecasting at Westpac.
This move has triggered RBA’s Governor Michele Bullock to indicate that further rate cuts are unlikely in the near future. On the other hand, recent trends in the money market suggest that the likelihood of another rate cut next year is low. Still, economists expressed their belief that rate cuts might start again in May.
Meanwhile, the central bank announced its prediction on Tuesday, November 18, highlighting that unemployment would slightly increase and remain at 4.4% for the duration of its forecast. It also shared its expectation that wage growth would slow down to 3% next year.
3% wage growth is ideal for central bank
Reports indicate that economists think that a wage growth of around 3% aligns with the central bank’s target of maintaining inflation between 2% and 3%. This applies especially in the event of low productivity growth.
Bullock argued that the board seeks to identify productivity improvements to ensure that wages can rise without resulting in a surge in inflation levels again.
When reporters reached out to a government representative for comment on the matter, the spokesperson stated that they are aware of the situation and are implementing new strategies to enhance economic efficiency.
As the central bank reviewed its inflation and employment targets last month, emerging data highlighted key challenges, including rising wages, a tight labour market, and strong consumer confidence, which are likely to influence the Reserve Bank’s interest rate decisions in the months ahead.
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