MNI: Australia Melbourne Institute Wage Expectations Rise

By Sophia Rodrigues

     SYDNEY (MNI) - Expectations on pay growth over the next 12 months rose

significantly in the fourth quarter, marking the largest increase since Q3 of

2015 and supporting the Reserve Bank of Australia's expectation that wage growth

would start rising gradually.

     Inflation expectations on a weighted mean basis, however, fell in December

but remained unchanged on a trimmed mean basis.

     Data published by the Melbourne Institute Thursday showed pay growth

expectations jumped to 2.4% in Q4 from 1.7% in Q3 and were the highest since the

2.9% gain in Q3 2015. Actual pay in Q4 also rose, albeit slightly, to 1.5% from

1.4% in Q3.

     Wage growth expectations are nearly as important to the RBA as the actual

wage outcome, going by comments from RBA Governor Philip Lowe, who recently said

one of his monetary policy strategies is to manage wage expectations.

     "To the extent that we have a strategy here, my strategy has been to talk

about the benefits of stronger wage growth, to put a floor under wage

expectations," Lowe said at the Q&A session following a speech on November 21.

     From the Melbourne Institute Consumer Inflationary Expectations survey for

December published Thursday.

                                     December   November

--------------------------------------------------------

                                    %, Annual  %, Annual

Expected Inflation (trimmed mean)        +3.7       +3.7

Expected Inflation (weighted mean)       +2.4       +2.4

     Expectations on Pay Growth:

                            Q4         Q3

-----------------------------------------

                     %, Annual  %, Annual

Expected Pay Growth       +2.4       +1.7

Actual Pay Growth         +1.5       +1.4

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

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