| Consensus | Actual | Previous | |
|---|---|---|---|
| Quarter over Quarter | 1.0% | 0.8% | 0.8% |
| Year over Year | 3.8% | 3.6% | 3.7% |
Highlights
Australia's wage price index rose 0.8 percent on the quarter in the three months to June, as it did in the three months to March, with year-over-year growth in the index easing from 3.7 percent to 3.6 percent. This is the first decline in year-over-year growth in more than two years and follows recent data showing ongoing tightness in the labour market but a moderation in consumer price pressures.
Today's data are in line with an assessment made by officials at the Reserve Bank of Australia at their most recent policy meeting earlier in the month that wage growth will be steady in the three months to June. Officials noted, however, that they expect wage growth will pick up again in the second half of the year. They also warned that their forecasts for inflation to keep falling towards their target range was based on an assumption that productivity growth would pick up and restrain growth in labour costs. Today's data will likely reinforce officials' assessment that labour market conditions remain strong and that their forecasts for the timing of a return to the inflation target remain uncertain.
Today's data are in line with an assessment made by officials at the Reserve Bank of Australia at their most recent policy meeting earlier in the month that wage growth will be steady in the three months to June. Officials noted, however, that they expect wage growth will pick up again in the second half of the year. They also warned that their forecasts for inflation to keep falling towards their target range was based on an assumption that productivity growth would pick up and restrain growth in labour costs. Today's data will likely reinforce officials' assessment that labour market conditions remain strong and that their forecasts for the timing of a return to the inflation target remain uncertain.
Market Consensus Before Announcement
Wage growth in the three months to June is expected to show increasing pressure for a tenth straight quarter, rising 1.0 percent on the quarter and 3.8 percent on the year. These would compare with first-quarter rates of 0.8 and 3.7 percent.
Definition
A measure of the price employers pay for labour due to market factors, specifically wages and salaries. Wages and salaries reflect payments in cash or kind that are made at regular intervals and include: piecework payments; enhanced or special allowances for working overtime or unsocial hours; regular supplementary allowances ; payments for employees away from work for short periods but not including absences for sickness or injury; and bonus and incentive payments.
Description
The wage price index is an easy way to evaluate wage trends and the risk of wage inflation. Officials at the Reserve Bank of Australia closely monitor wage inflation to assess the outlook for consumer prices and broader inflationary pressures. Wage pressures tend to strengthen when economic activity is booming and the demand for labor is rising rapidly. During economic downturns, wage pressures tend to be subdued because labor demand is down. By tracking labor costs, investors can gain a sense the outlook for inflation and monetary policy, with interest rates more likely to rise when wage inflation is high.
