MNI BRIEF (CORRECTED): RBA's Lowe: Workers Face 1.5% Pay Cut

(Corrects day of remarks)

Reserve Bank of Australia Governor Philip Lowe said that Australians are likely to see a 1.5% cut in real wages this year as inflation continues to outpace wages growth.

“Wages are maybe going up high twos, let’s say three, and inflation is 4.5% - that’s a real wage cut of 1.5%,” Lowe said at a national journalism awards function on late Tuesday, adding that CPI inflation – currently at 3.5% - would likely go to 4.5% “depending on what happens with oil prices.”

Lowe's off-the-cuff remarks are significant because the central bank has made rising wages key to any rise in official interest rates from the current record low of 0.10%, see: MNI INTERVIEW: Aus Labour Market Rebound "Remarkable"-ABS. The RBA has said a rate rise this this year is “plausible”, but also said one may not come until 2023 or even as late as 2024, depending on whether inflation is judged to be sustainably within the target band of 2% to 3%.

Trimmed mean inflation, the bank’s preferred measure, is at a seven year high of 2.6% but the bank has said it is unconvinced if this will be sustained.