MNI BRIEF: RBA Sees Wages Growth Faster Than Inflation By 2023

The Reserve Bank of Australia has forecast that wages growth will outpace inflation by December 2023 as Australia’s unemployment rate falls to a forecasted fifty year low of 3.6%.

The RBA’s latest Statement on Monetary Policy, released on Friday, forecasts that by June 2023 wages will rise by 3.5% against a forecast CPI of 3.1% and underlying inflation also at 3.1%, See: MNI INTERVIEW: RBA's Harper Says Wages Need 4% Growth.

Wages growth has lagged inflation over the last few years and had been a key factor in the RBA’s dovishness, a cycle which ended this week as the bank raised rates by 25 basis points to 0.35%. In its decision on Tuesday, the RBA said its liaison programme had reported that wages were rising across the board in Australia. The last wage price index showed a 2.3% increase for 2021, with new data for the first quarter of 2022 due for release on May 18.

At 2.3% wages are significantly lower than current CPI inflation, which is at 5.1%.