Big 4 Thoughts Ahead Of Today’s WPI Data

The big 4 domestic banks weigh in on the upcoming Q122 wage price index data (due at 11:30 Sydney/02:30 London). Note that BBG consensus looks for +0.8% Q/Q & +2.5% Y/Y vs. prior readings of +0.7% and +2.3%, respectively.

• ANZ: We expect wages growth to accelerate a touch, with a gain of 0.8% Q/Q, a lift from the 0.7% Q/Q pace in Q4. The RBA has become more positive about wages growth, but this will likely feed more into the Q2 wages report rather than the one released this week.
• CBA: We expect the WPI to confirm our view that wages growth has continued to accelerate. This view is supported by our own internal data based on wages and salaries paid into CBA accounts. Both the WPI and labour force survey data (due Thursday) will be important considerations for the RBA Board when they next meet on 7 June. While the RBA opted not to wait for the official data on wages and labour costs before raising the cash rate in May, these data will matter in terms of whether the RBA delivers a ‘business as usual’ 25 basis point increase to 0.6% or a larger increase of 40 basis points to a more orthodox cash rate target of 0.75%.
• NAB: For wages we pencil in an ongoing acceleration in the pace of WPI growth, expecting something on the stronger side of a 0.7% Q/Q and 2.4%. An upward surprise would show wage pressures being more prevalent than the RBA thought in May, increasing the risk of a supersized 40-50bp rate hike in June.
• Westpac: Wages are now back to a pre-Covid pace where wages were underperforming economic activity. If there was ever a time for wages to regain some of relationship with broader labour market indicators, 2022 must be the year. Even more important than the fall in unemployment to 4% has been the more than halving of underemployment, from a peak of 13.6% in Apr 2020 to 6.3% in Mar 2022. Along with business and consumer surveys reporting meaningful rises in wages, we are looking for the Wage Price Index quarterly pace to lift to 0.8% from 0.7%. A rise closer to, or above 1.0% would be a surprise given the lags between labour market conditions and wages plus the structure of the WPI.