Solid Gold Berjangka | Australia Pay Gains Suggest Economy Will Avoid Wage-Price Spiral

02:01 15 August in Economy, SOLID GOLD BERJANGKA | SOLID GROUP

Australian salaries grew at a much slower pace than inflation in the three months through June, suggesting the economy will avoid a wage-price spiral and the Reserve Bank is likely to stand pat for a third straight meeting.

The Wage Price Index advanced 3.6% from a year earlier, slightly below economists’ expectations of a 3.7% gain, Australian Bureau of Statistics data showed Tuesday. On a quarterly basis, wages grew 0.8% versus a forecast 0.9% rise.

The data indicate that pay gains are still relatively contained compared with global counterparts and remain detached from inflation that’s currently running at 6%. That also reinforces expectations the RBA will keep borrowing costs unchanged at 4.1% at its Sept. 5 meeting as it closely monitors price pressures.

Governor Philip Lowe reckons wage growth of 4% is consistent with the RBA’s inflation goal provided the economy’s productivity performance improves. But policymakers are mindful a prolonged period of elevated inflation could trigger larger salary demands and prompt businesses to put up prices, making it much tougher to return CPI to the 2-3% target.

Source : Bloomberg

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