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NAB: RBA Still To Hike 25bp In June

RBA

NAB note that “the WPI today showed wages rose 0.7% Q/Q and 2.4% Y/Y in Q1. That was in line with NAB’s forecast but below consensus for a 0.8% Q/Q and 2.5% Y/Y rise. Wage Price Index growth is a measure of base wages for a constant sample of jobs and today’s data reflect wages back in February, with broader measures of labour costs likely to be outpacing growth in this measure. Although softer than market expectations, today’s data won’t be a big surprise to the RBA (which also expected a 0.7% Q/Q outcome) and largely predates the recent shift the Bank has detected in its business liaison program. It is however consistent with continued gradual acceleration in wages growth to beyond prevailing pre-pandemic levels alongside the tightening in the labour market to late last year. The RBA shifted in May from a backward-looking focus on lagging wages and labour cost data to be more forward looking as inflation surged significantly above target and business liaison suggests wages are now accelerating. We see the RBA following up May’s interest rate lift-off with another ‘business as usual’ 25bp hike in June, though a sharp fall in the April unemployment rate tomorrow would no doubt be relevant in the Board’s deliberations.”

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NAB note that “the WPI today showed wages rose 0.7% Q/Q and 2.4% Y/Y in Q1. That was in line with NAB’s forecast but below consensus for a 0.8% Q/Q and 2.5% Y/Y rise. Wage Price Index growth is a measure of base wages for a constant sample of jobs and today’s data reflect wages back in February, with broader measures of labour costs likely to be outpacing growth in this measure. Although softer than market expectations, today’s data won’t be a big surprise to the RBA (which also expected a 0.7% Q/Q outcome) and largely predates the recent shift the Bank has detected in its business liaison program. It is however consistent with continued gradual acceleration in wages growth to beyond prevailing pre-pandemic levels alongside the tightening in the labour market to late last year. The RBA shifted in May from a backward-looking focus on lagging wages and labour cost data to be more forward looking as inflation surged significantly above target and business liaison suggests wages are now accelerating. We see the RBA following up May’s interest rate lift-off with another ‘business as usual’ 25bp hike in June, though a sharp fall in the April unemployment rate tomorrow would no doubt be relevant in the Board’s deliberations.”