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Australia Wage Price Index (Q3)

The 0.6% q/q rise in the wage price index in Q3 will provide the RBA with some confidence that rates need to remain low in the near term. But we think that wage growth will rise over 2022, putting pressure on the Bank.
Ben Udy Australia and New Zealand Economist
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More from Australia & New Zealand

Australia & New Zealand Economics Weekly

More 50bp hikes coming

We agree with RBA governor Phillip Lowe that market pricing for the Cash rate looks too aggressive. But we also think the consensus is still too dovish. After all, Governor Lowe is starting to grow concerned that wage growth will be too strong to allow the Bank to meet its target. And the RBA is still lagging behind a number of its peers in its hiking cycle. We therefore expect the RBA to hike rates to a peak of 3.1%, higher than the analyst consensus of a peak of 2.60%.

24 June 2022

Australia & New Zealand Economics Weekly

Inflationary pressures keep building

The big minimum wage hike announced by the fair work commission this week will lead to higher wage growth over the coming year. Given the tightness in the labour market and rising cost pressures, businesses will be forced to pass that rise onto consumers. That suggests the risks to our forecast that inflation will peak just above 7% in Q3, are tilted to the upside. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now  

17 June 2022

Australia & New Zealand Data Response

Australia Labour Market (May 2022)

The strong rise in employment in May will keep pressure on the RBA to continue its aggressive hiking cycle in the months ahead. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now  

16 June 2022

More from Ben Udy

Australia & New Zealand Economics Weekly

Inflation will keep the RBA under pressure

Business purchase costs in the October NAB survey rose to their strongest level since 2008, consistent with trimmed mean inflation of nearly 1.5% q/q. That probably overstates the strength in underlying inflation in the months ahead as other measure of inflation in the survey were more subdued. While we do expect strong price growth to keep pressure on the RBA to tighten monetary policy, our view that wage growth will only approach 3% by the end of next year underpins our view that the Bank will hike later and less aggressively than financial markets expect.  

12 November 2021

Australia & New Zealand Data Response

Australia Labour Market (Oct.)

The rise in the unemployment rate suggests that the labour market continued to suffer right up until the end of the recent lockdowns. But given the ending of lockdowns in mid-October we expect the unemployment rate to fall again in the months ahead.

11 November 2021

Australia & New Zealand Economics Weekly

RBNZ set to hike by 50bp, RBA remains the archdove

The exceptional strength of New Zealand’s mean that we now think the RBNZ will hike rates by 50bps in November and by a further 100bps next year, which would take the OCR to 2.0%. That’s above the analyst consensus but less hawkish than market pricing as we still think falling house prices and higher debt servicing costs will weigh on consumption and dwellings investment next year. In Australia, the RBA’s persistently dovish stance has taken some of the wind out of financial markets’ sails. But we still believe that wage growth will pick up sooner than the Bank anticipates. That’s why we are sticking to our view that the RBA will first hike rates in early 2023, a year sooner than the Bank expects.

5 November 2021
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