MNI 5 Things: Risks Asymmetric for Australia Wage Price Data

By Sophia Rodrigues

     SYDNEY (MNI) - The Australian Bureau of Statistics is due to release wage

price index for Q4 at 1130 hours local time Wednesday. Once regarded as a tier

two or a tier three release, this is now the most important data as far as the

Reserve Bank of Australia's monetary policy is concerned.

     Following are the five things we would look for in the release, and how we

see the risks:

     --MNI median forecast is for 0.5% q/q and 2.0% y/y rise in wage price

index, the same pace as Q3. Any deviation from the forecast would cause reaction

in both the rates and the foreign-exchange markets.

     --Risks are, however, asymmetric. A lower-than-expected outcome could cause

a bigger reaction that a higher outcome. Only one economist (Deutsche Bank) out

of 11 in MNI poll expects a lower-than-forecast rise of 0.4% q/q. A lower number

would mean the RBA's monetary policy would remain on hold for still longer and

would prompt market to cut pricing for rate hikes. 

     --A higher number (two out of 11 expected +0.6% q/q) would only mean the

rise that was expected in the Q3 data, has happened in Q4. It may not be a sign

that acceleration in wage growth is finally happening because there are factors

that are expected to weigh on wages going ahead.

     --Private sector wage growth rose 1.9% y/y in Q3, after three quarters of

+1.8% y/y growth. Any return to +1.8% y/y in Q4 could be regarded as a worrying

sign for wage growth prospects.

     --Wage growth in the retail sector is the one to watch for closely. In Q3,

it accelerated to +0.9% q/q in original terms. But y/y was +1.6% compared with

+2.2% in 2016 and +2.5% in 2015. 

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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