MNI DATA ANALYSIS: Australia Q3 Wages Subdued, MonPol Risk

     SYDNEY (MNI) - Australia's wage price index rose less than expected in the

third quarter, raising concerns that wage growth could remain subdued for longer

and keep the Reserve Bank of Australia's monetary policy on hold for an extended

period.

     Data published by the Australian Bureau of Statistics showed wage price

index rose 0.5% q/q, lower than MNI survey median forecast for +0.7%. The y/y

wage pace rose to +2.0% but was also short of expectations for a 2.2% increase.

     Subdued wage growth is one of RBA's top concerns because until household

incomes rise, the outlook for household consumption cannot improve

significantly. This outlook is the key reason why the RBA doesn't expect

underlying inflation to rise above the lower band of its target band even by the

end of its current forecasting period in December 2019.

     The RBA's SOMP forecast and commentary both pointed to a central bank

that's likely to remain on hold for longer, with the risk of easing still not

negligible. The wage price data have only increased the downside risks to

monetary policy.

     Wage growth remained subdued despite the impact of a rise in the minimum

wage. ABS Chief Economist Bruce Hockman said: "Annual wages growth increased

marginally to 2.0 per cent in the September quarter 2017. The higher wage growth

in the September quarter was driven by enterprise agreement increases, end of

financial year wage reviews and the Fair Work Commission's annual minimum wage

review." 

     In original terms, wage growth accelerated to +0.8% in the private sector

in Q3 from +0.4% in Q4, but the y/y pace remained unchanged at +1.9%.

     The mining sector recorded the lowest wage price rise, up 0.2% q/q and 1/2%

y/y. Wages in the retail sector accelerated to +0.9% q/q in Q3 from +0.1% in Q2,

while construction also saw an acceleration to +0.6% from +0.3%.

     From Wage Price Index for the third quarter published by the Australian

Bureau of Statistics on Wednesday:

                                            Q3                            Q3

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

                  (Q/Q %, seasonally adjusted)  (Y/Y %, seasonally adjusted)

Wage-Price Index                          +0.5                          +2.0

MNI Median                                +0.7                          +2.2

                          (Range +0.5 to +0.8)          (Range +2.0 to +2.3)

Private Sector                            +0.5                          +1.9

Public Sector                             +0.5                          +2.4

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

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