Key data points for the Reserve Bank of Australia (RBA) have begun trickling in ahead of the central bank’s final interest rate decision of the year.
These include the wage price index (WPI), which rose 1.3 per cent in the September quarter, according to data released by the Australian Bureau of Statistics (ABS) on Wednesday.
This was the highest quarterly growth in the WPI’s 26-year history, but the result was in line with market expectations. On an annual basis, the WPI was up 4.0 per cent, the highest growth since the March quarter of 2009, and slightly above expectations for a 3.9 per cent lift.
“While annual WPI growth came in a touch higher than consensus and the RBA’s forecast, this was due to an upward revision in Q2 quarterly growth,” noted ANZ senior economist Catherine Birch and economist Madeline Dunk.
“We don’t expect today’s data will change the RBA’s thinking ahead of its December meeting, where we expect the RBA to hold the cash rate at 4.35 per cent.”
According to the ANZ economists, record Q3 WPI growth had been “widely expected”.
“Given it was partly driven by temporary factors, it will not concern the RBA as much as would be expected on face value,” Ms Birch and Ms Dunk added.
Private sector wages increased by 1.4 per cent quarter on quarter (q/q) and 4.2 per cent year on year (y/y), driven by the Fair Work Commission’s decision to lift the minimum wage by 5.75 per cent as well as a one-off 15 per cent increase to the award wages of more than 250,000 aged care workers.
The ABS noted that labour market pressure and increases in the consumer price index (CPI) being factored into wage and salary review decisions also played a part.
Meanwhile, public sector wages rose by 0.9 per cent q/q and 3.5 per cent y/y following the removal of state wage caps and new enterprise agreements coming into effect.
CommSec senior economist Ryan Felsman said that the pick-up in wages observed in Q3 had been anticipated by the RBA, which hiked the cash rate by 25 basis points to a 12-year high of 4.35 per cent earlier this month.
“With Aussie annual wage growth still lagging consumer prices and the RBA’s cautious communication last week, investors appeared to doubt whether this report alone would trigger a further tightening in monetary policy, pricing just a 7 per cent chance of a follow-up hike in December,” Mr Felsman said.
“In fact, money markets shrugged-off the stronger-than-expected annual WPI print, instead focusing on the weaker-than-expected US consumer inflation data, which overnight came in weaker than anticipated. Traders are now pricing in a 50 per cent chance of the RBA raising interest rates by May next year.”
Next up in Australia’s data calendar is the labour force statistics from the ABS on Thursday. The October monthly CPI indicator is also due out on Wednesday, 29 November.
