Salary growth in Australia did not meet analysts’ forecasts
2023.02.22 02:05
Salary growth in Australia did not meet analysts’ forecasts
By Kristina Sobol
Budrigannews.com – Despite the fact that Australian wages increased at the fastest annual rate in a decade during the most recent quarter, it was still below market expectations, which may reduce pressure for further aggressive interest rate increases and lower the local currency.
According to figures released on Wednesday by the Australian Bureau of Statistics, the wage price index increased by 0.8 percent in the December quarter compared to the previous quarter, exceeding expectations of 1.0 percent.
A relief for policymakers who are concerned that high inflation could result in a harmful price-wage spiral, annual pay growth increased to 3.3% from a revised 3.2%. However, this increase was still below forecasts of 3.5%.
The Australian dollar fell 20 ticks to $0.6847 as markets anticipated an upside surprise, and futures moderated the likely future peak for interest rates slightly.
As inflation reached a 20-year high of 7.8% late last year, the Reserve Bank of Australia (RBA) has already increased interest rates by a significant 325 basis points to a decade high of 3.35 percent.
However, in an desperate attempt to dampen domestic demand and maintain stable inflation expectations, it pleasantly surprised investors this month by hinting at additional increases.
As a consequence of this, the markets had predicted that interest rates could reach a peak of 4.35 percent, but that prediction was tempered to 4.1% following the news about wages.
Policymakers have been worried that wages will go up with prices, increasing costs even more. The actual outcome ought to be a pleasant surprise given that the RBA had predicted wage growth of 3.5 percent for the previous quarter.
Marcel Thieliant, Capital Economics’ head of Asia Pacific economics, stated, “Wage growth was weaker than the RBA had expected last quarter and we think it won’t accelerate as rapidly as the RBA anticipates.”
“We think it will peak at just under 4% instead of the RBA’s forecast of 4.2%) because we expect the labor market to loosen more quickly than the Bank anticipates.”
The RBA found that roughly one-third of businesses it surveyed had reported wage increases of more than 5%, indicating that even as unemployment remains close to 50-year lows, business surveys are still pointing to better pay deals.
According to ABS data, private sector wages increased by 3.6% annually in the December quarter, while public sector wages increased by 2.5%.
