| Consensus | Actual | Previous | |
|---|---|---|---|
| Quarter over Quarter | 1.3% | 1.3% | 0.8% |
| Year over Year | 3.9% | 4.0% | 3.6% |
Highlights
Australia's wage price index rose 1.3 percent on the quarter in the three months to September after advancing 0.8 percent in the three months to June, with year-over-year growth in the index accelerating from 3.6 percent to 4.0 percent. Monthly labour market data over that period showed ongoing low unemployment rates and participation rates close to record highs.
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 conditions in the labour market remain tight. Officials noted then that wage growth has picked up but judged that it remains consistent with meeting their inflation forecast provided productivity growth improves. Nevertheless, officials concluded at that meeting that further policy tightening was required and advised that additional rate hikes may yet be required. Today's data showing stronger wage growth will likely reinforce concerns about upside risks to the inflation outlook.
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 conditions in the labour market remain tight. Officials noted then that wage growth has picked up but judged that it remains consistent with meeting their inflation forecast provided productivity growth improves. Nevertheless, officials concluded at that meeting that further policy tightening was required and advised that additional rate hikes may yet be required. Today's data showing stronger wage growth will likely reinforce concerns about upside risks to the inflation outlook.
Market Consensus Before Announcement
Wage growth in the three months to September is expected to rise 1.3 percent on the quarter and 3.9 percent on the year. These would compare with second-quarter rates of 0.8 and 3.6 percent, which were both slightly lower than expected.
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.
