CBA note that “the WPI has its limitations. And it is not the only measure of labour costs. Indeed we will receive an update on some other measures of labour costs in the national accounts which will be published on 1 June (i.e. before the RBA’s June Board meeting on 7 June). But the WPI is still a very important publication that enables us to better understand what is occurring across the economy with respect to wages inflation. After today’s data we remain comfortable with our call that the RBA will deliver a ‘business as usual’ rate hike of 25bp at the June Board meeting. The official wages data has not made the case for a larger hike. Indeed, the wage price index today highlights the risk of raising rates too high and too quickly given wages have so far been slow to respond to the tightness in the labour market. Next up is the April labour force survey (due tomorrow). Our forecast is for employment to rise by 30K over the month. On an unchanged participation rate that would see the unemployment rate edge lower to 3.9% (from 4.0%).”
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