MNI 5 THINGS: Australian Wage Price Index 2.3% Y/Y, As F'cast

By Lachlan Colquhoun

     SYDNEY (MNI) - Australia's Wage Price Index grew in line with expectations

in the third quarter, gaining 0.6% q/q and rising 2.3% y/y, data released

Wednesday by the Australian Bureau of Statistics showed.

     The index rose 0.6% q/q and 2.1 % y/y in the June quarter.

     Following the Nov 14 release, we outline five themes of note.

     --Data moving to Reserve Bank script. 

     The RBA is watching wages growth as an inflation driver in considering

changing its current dovish policy on interest rates, currently at a record low

1.5%. Today's data shows some momentum is building for higher wages and this can

be expected to flow through to inflation in early 2019. Year-on-year wages

growth has increased from 1.9 % in early 2018, moving through the 2% level in

the first quarter of the year to reach today's two year high. The September

quarter inflation figure was a sluggish 1.9 %, although the RBA had telegraphed

a lower figure due to changes in childcare funding. The bank has been focussed

on wages growth and today's data is confirmation that the economy is moving as

forecast.

     --Focus now on employment data. 

     Today's wages data comes the day before the release of Labour Force data

and suggests that the economy continues to move closer to full employment.

Unemployment has been declining steadily and came in at 5.0% in September. The

rate held steady at 5.5 % all through 2017 but began to fall from May 2018. The

RBA is expecting further falls to around 4.5% by next year, which will in turn

help create the upward pressure on wages and inflation the Bank is looking for.

     --Finance sector wages under pressure. 

     Wage growth in the finance sector was the lowest of all industry sectors in

original terms at 0.4% q/q. Although y/y growth was at the national average of

2.3%, wages growth in the finance sector has slowed significantly from the

December quarter of 2017, when it touched 0.9%, more than double the national

average and the highest of any sector. Sentiment in the sector has soured as a

result of Royal Commission into Misconduct in the finance industry, and this has

flowed through to wages and put a brake on growth.

     --Accommodation and food services showing strong growth. 

     Wages growth in this sector was a nation high 1.9% in original terms, a

jump from 0.1% in the previous quarter. In September's retail trade data,

turnover at current prices in the cafe restaurant and takeaway food industries

gained 0.5%, more than double the national average of 0.2%. Increasing prices in

this sector have been matched by higher wages.

     --Private sector wages play catch up.

     Public sector wages have been growing at a faster rate, but today's result

shows private sector wages narrowing the gap. Private sector wages gained a

seasonally adjusted 0.5% for the quarter, compared to 0.6% in the public sector.

In year on year terms, public sector wages have increased 2.5% against 2.1% in

the private sector.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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