VIEW: ANZ: Wage Growth Accelerates

In the wake of today’s labour market report ANZ note that “wage growth has increased markedly, with productivity-adjusted private sector labour costs up 3.1% Y/Y (2.8% previously), unadjusted labour costs up 5.0% Y/Y (4.5% previously), and average hourly earnings lifting 5.3% Y/Y (4.1% previously). All three wage growth figures are clearly still far behind Q1’s 6.9% Y/Y CPI inflation print - but are accelerating faster than we expected. For the RBNZ, which had pencilled in a 3.1% lift in private sector labour costs in the February MPS, this data will confirm that the labour market will be a key driver of domestic inflation pressures over 2022. This will require ongoing interest rate hikes to bring labour demand back in line with labour supply and nip a potential wage-price spiral in the bud. That’s consistent with our expectation for a 50bp hike in May.”