Economy

Q1 Wage Growth Slumps Below Forecasts

Q1 Wage Growth Slumps Below Forecasts”

The Board still agrees the next move was more likely up than down, assuming the economy gathered momentum as expected.

In the United States, Treasuries were little changed to open the week on Monday during a relatively quiet session light on data of great significance with news flow largely limited to FOMC commentary from Cleveland Fed President Mester overnight, reiterating the likelihood of further rate hikes over the medium-term and St. Louis Fed President Bullard warning of possible yield curve inversion in late 2018 or early 2019 if the Fed continues to tighten further.

Wage growth in Australia remains fairly atrocious, even with record employment growth in 2017.

As seen in the chart below from Callam Pickering, APAC Economist at global jobs site Indeed, while nominal wages did increase, including inflation, real wage growth went backwards during the quarter.

Australia's jobless rate has remained stubbornly stuck around 5.5 percent and levels of underemployment - those already working but wanting more hours - are near historical highs, a major factor weighing on wages.

On Tuesday, RBA Deputy Governor Guy Debelle said it may take a lower unemployment rate than now expected to generate a sustained move higher in wage growth.

Reading between the lines of Debelle's speech, the RBA won't raise interest rates until wages and household income grow faster than they have in recent times.

Indeed, the RBA expects the unemployment rate to stay there by year-end. It said that March quarter inflation data was in-line with Bank's expectations and an appreciation in the AUD would slow expected acceleration in growth, inflation.

The RBA said stricter lending criteria by banks had helped in containing the build-up of risk on household balance sheets.



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