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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
RBA
In the Q&A after RBA Governor Lowe’s speech last night, he was asked if he was exaggerating his caution regarding a wage-price spiral. His response not only explained how such a spiral occurs but included why it would be a problem, and made clear that it is a phenomenon that the RBA wants to avoid. This morning government members are united in their criticism of his response, as reported by The Australian.
- Governor Lowe said “If we all buy into the idea that wages have to go up to compensate people for inflation, it will be painful,” … “and this is what happened in the 70s and 80s … and that tended to be a disaster.” The cost-of-living adjustment included in the Queensland teachers pay deal shows that this could be a risk.
- He reassured that while negative real wages are “tough” for people, it is what is needed so that when supply-side issues are resolved inflation can come down.
- There has been a lot of discussion around wages growth, especially in real terms. But the RBA doesn’t expect real wage growth to become positive until H2 2024.
- The Q3 WPI rose 3.1% y/y but when deflated by headline CPI it fell 3.9% y/y. This is not only the lowest since the series began in 1998 but the next lowest was the GST-impacted -2.8% in Q3 2000. Other higher measures of nominal wages are also in negative territory in real terms with the average pay change -3% y/y and real SEEK advertised salary index -3.1% y/y.
- Real wage growth averaged +0.6% y/y in the 10 years from Q1 2011 compared with 2.5% for nominal. Real wage growth was flat from Q1 2017 to Q2 2018.
Australia real wages growth ex bonuses y/y% (deflated with CPI)
Source: MNI - Market News/Refinitiv/ABS/SEEK
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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