Australia's Third Quarter Wage Price Index

  • Nov 14, 2018 AEDT
  • Team Kalkine
Australia's Third Quarter Wage Price Index

In line with market forecasts the Australia wage price index has just been released. For the three months ended September, matching the 0.6 percent rise from the previous quarter, the Wage Price Index rose 0.6 percent.

Especially at a time when many expect Australian home prices will continue to edge lower, if the Reserve Bank of Australia’s ambitious forecasts a slightly faster pickup in underlying inflationary pressures, for lower unemployment and faster GDP growth to be achieved in the years ahead it will almost certainly need wage growth to rise. 

The broader outlook for wage growth whether it’s to support household spending inflation or GDP growth will be the key. Carrying the potential to generate volatility in Australian financial markets, for the September quarter Australian Wage Price Index will be a blockbuster data release.

Australian wage growth has been terrible in recent years as explained by TD Securities Global Rates, FX and Commodities Strategy team, helping to explain why the RBA’s cash rate remains stuck at its current record low of 1.5%, especially compared to periods in the past.

It says, ‘between the December quarter 2016 low of 1.87% and the June 2018 quarter report of 2.14%, the pace of annual wages growth has barely increased.’ Before 2014 a 5% unemployment rate used to generate annual wage growth closer to 3.5-4%.

In order to offset weakness in the housing market and an increase in borrowing costs, the RBA will need to see household income growth improve before it can lift official interest rates. However, many economists and financial markets in whole cant see that RBA lifting its cash rate until 2020.

TD says, ‘the main trigger for higher cash rates for some time now as seen by the markets is 3% annual wages growth, in a rate hike for the second half of 2019 to make the markets seriously price they need to see this report posting annual wages growth closer to 2.5%.

Although not everyone agrees with Bloomberg forecasting a quarterly increase of 0.5% or less some believe last year the result in the September quarter was influenced by one-off factors.

The increase in Australia’s minimum wage rate on July 1 which lifted the base hourly rate by 3.5 percent will have impact on the data, no one is sure of what there will be, particularly in 2017 a similarly-sized increase in 2017 didn’t translate to a big lift in broader wage growth.


Disclaimer

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkinemedia.com and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.

 

 

All pictures are copyright to their respective owner(s).Kalkinemedia.com does not claim ownership of any of the pictures displayed on this website unless stated otherwise. Some of the images used on this website are taken from the web and are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it below the image.

 

There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

CLICK HERE FOR YOUR FREE REPORT!
   
x
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK