Free Trial

MNI DATA ANALYSIS:Wage Growth Reduce Upside Risk to RBA MonPol

By Sophia Rodrigues
     SYDNEY (MNI) - Wage price index in Australia rose less than expected in the
first quarter, leaving some questions on whether wage growth has indeed troughed
and raising worries about the outlook for household consumption and inflation.
     The data suggests the upside risks to the Reserve Bank of Australia's
monetary policy stance may be a bit too optimistic, and there is a greater
chance that the cash rate would remain on hold for longer.
     Data published by the Australian Bureau of Statistics Wednesday showed wage
price index rose 0.5% q/q in Q1, the same pace as Q4 which was revised downwards
from +0.6%. The outcome was lower than MNI median forecast for +0.6% q/q.
     However, wage price index for the two quarters prior to that were each
revised up to +0.6% from +0.5%. This is why the y/y index rose 2.1% y/y, the
same pace as Q4, and matched the MNI median forecast. 
     The slowing in q/q wage growth to +0.5% in the last two quarters from +0.6%
raises some doubt on whether wage growth has troughed as suggested by the RBA.  
     This was the 13th quarter in a row where y/y wage price index has risen
less than the mid-point of the Reserve Bank of Australia's 2% to 3% target band.
It was the 22nd consecutive quarter where the rise was below 3.5% which RBA
Governor Philip Lowe has suggested is the ideal growth rate needed to get
inflation at the mid-point of the target band.
     In fact, But none of the industries showed wage price index of even 3.0%
y/y -- the largest was 2.7% y/y in healthcare and assistance.
     Private sector wages grew at 1.9% y/y for three quarters in a row. This is
an acceleration from +1.8% in each of the two quarters prior to that but has
remained below 2.5% growth for 13 quarters in a row.
     In original terms, wages in retail trade sector rose 0.2% for the second
straight quarter, and in y/y terms slowed to +1.5% from +1.8%. A lack of
acceleration in retail sector wages suggests continued competition in the sector
and raises concerns on how long it would take for the downtrend in retail prices
to dissipate. This is important for the inflation outlook.
     Construction wages slowed to +0.2% q/q from +0.6% in Q4. This indicates
there isn't yet any pressure on construction wages despite strong growth in the
industry. This would ideally be the first sector to show upward pressure on wage
growth given the large amount of infrastructure work going on. In y/y terms too,
construction wage index slowed to 1.7% from 1.9% rise in 2017, though a minor
bright spot is that it is better than 1.6% rise in 2016.
     Wages in wholesale trade was another drag, rising 0.2% q/q for the second
straight quarter and in y/y terms slowing to +1.7% from +2.0%. The only two
sectors showing decent wage acceleration was education and training, and
healthcare and assistance. 
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com
[TOPICS: MALDS$,MMLRB$,M$A$$$,M$L$$$,MT$$$$]

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.