RBA rates of interest: AMP reckons slowing wages | Australian Markets
Aussie wage growth slowed to three.2 per cent within the yr to December as economists battle over the possibilities of one other rate of interest cut by the Reserve Financial institution.
The tempo was down from 3.6 per cent growth for September, and beneath economist expectations.
It got here as Judo Financial institution chief economist Warren Hogan tipped the Reserve Financial institution will cut rates of interest again in April.
Mr Hogan had been among the many strongest advocates to keep the money fee elevated to battle inflation however warned the RBA was responding to widespread stress.
“We expect to see a possible follow-up and final rate cut at the next board meeting on April Fool’s Day,” he mentioned.
“The RBA cannot simply cut rates once prior to an election as this will look politically motivated.
“Another rate cut will make this change to interest rates look more like a traditional policy adjustment reflecting economic conditions.”
Mr Hogan mentioned a marketing campaign by unions, some teachers and financial markets had pressed the central bank to behave.
“The RBA board was clearly concerned that to hold rates steady yesterday would risk widespread criticism that it is ‘smashing the economy’,” he mentioned.
Governor Michele Bullock’s board lowered the benchmark rate of interest by 0.25 proportion factors to 4.1 per cent on Tuesday however she warned “we cannot declare victory just yet”. Markets have been too optimistic in regards to the pathway for future cuts, she mentioned.
But buyers in a single day priced in a 79 per cent probability of an April reduction, regardless of the robust speaking from Ms Bullock.
UBS and Financial institution of America on Wednesday picked Could for the subsequent cut.
Slowing wages add to the case that price stress has been squeezed from the financial system — regardless of low unemployment suggesting the roles market remains to be scorching.
The tempo of wage growth was beneath expectations and the bottom since mid-2022.
The RBA had on Tuesday projected 3.2 per cent wage growth in 2024 however anticipated that may speed up to three.4 per cent by June.
“Wages growth has declined quickly from its peak, driven by slowing employment markets’ conditions throughout 2023-24 and is clear evidence of the labour market not as red hot as previously feared, despite a low unemployment rate,” AMP’s My Bui mentioned.
“Slowing wages growth does not mean doom and gloom for wage earners though, because inflation has continued to tick down, and real wages growth continues to be positive.”
Constructive actual wage growth means employee pay is rising quicker than inflation.
Ms Bui mentioned wages would nonetheless have a long technique to go to catch up to the general surge in value of residing since 2020.
EY senior economist Paula Gadsby mentioned the numbers would give the RBA consolation that wages weren’t stoking inflation. It was an indicator inflation was shifting sustainably back into the two to three per cent goal band, Ms Gadsby mentioned.
“However productiveness growth has not picked up and can need to improve to make sure this degree of wage will increase doesn’t renew inflationary pressures.“
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