Q4 WPI Forecast To Print Above 4%

On Wednesday the Q4 wage price index is released and is expected to show a slowdown in the quarterly rate from the strong rise in Q3 which was driven by the official increase in minimum award wages. Bloomberg consensus is forecasting a 0.9% q/q rise down from Q3’s 1.3% bringing the annual rate up to 4.1% from 4.0%. The RBA is currently not concerned with wages growth around this rate but it sees persistent soft productivity growth as a material risk.

• The RBA said in its February meeting statement that it didn’t expect wages growth “to increase much further” and that it “remains consistent with the inflation target” assuming productivity growth improves.
• SEEK advertised salaries were only moderately lower in Q4 at +1.1% q/q and 4.6% y/y after +1.4% and 4.7% in Q3. Bargaining agreements continue to show strong wage outcomes.
• The big-4 domestic banks are all forecasting a consensus outcome. Overall forecasts are in a fairly narrow range of 0.8-1.1% q/q and 3.9-4.3% y/y.
• It will also be interesting to see the breakdown between private and public sector wages and the average pay increase in the private sector, which has been steadily rising for around two years. The ABS also provides a split of the share receiving a larger, smaller or equal wage increase compared to the year before.