Australia’s Wage Growth Slows for First Time Since Late 2020

(Bloomberg) -- Australian wage growth eased for the first time since the depths of the pandemic in the first three months of the year, in a positive result for the Reserve Bank which remains watchful of price pressures in the economy.

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The Wage Price Index advanced 4.1% the first quarter from a year earlier, the first slowing since the fourth quarter of 2020 and just below economists’ estimate of 4.2%, Australian Bureau of Statistics data showed Wednesday. On a quarterly basis, wages grew 0.8% versus a forecast 0.9%.

The report reinforced speculation that the RBA could cut rates at the end of this year, with money markets pricing a 36% chance of an easing in December from 30% earlier. The RBA has kept its benchmark interest rate at a 12-year high of 4.35% since late last year.

The RBA’s board is closely monitoring inflation and the labor market, with employment data due on Thursday and economists anticipating the jobless rate edged higher in April.

RBA officials have previously said wage growth of around 4% is consistent with the central bank’s 2-3% inflation target provided the economy’s productivity performance improves. Still, policymakers are mindful that a prolonged period of elevated inflation could trigger larger salary demands and prompt businesses to increase prices further, making it tougher to return CPI to target.

Private sector wages grew at a faster pace than those in the public sector on a quarterly basis, the ABS said, while highlighting that both recorded the smallest gains since the first quarter of 2022.

--With assistance from Tomoko Sato and Garfield Reynolds.

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