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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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