Interest rates are expected to stay on hold with quarterly wage growth easing in the December quarter, seasonally adjusted. With total hourly rates of pay, excluding bonuses, rising just 0.6 percent. Coming in under the market forecast of 0.8 percent.
The wage price index rose 2.9 per cent from a year earlier in Australian Bureau of Statistics (ABS) figures. This
“Interest rates will be on hold …. because it fits in with the Reserve Bank’s fairly sanguine view of inflation,” said Citigroup director Paul Brennan.
“They highlighted that in their last statement about wages and they’re expected to remain subdued and certainly that’s been reinforced in the figures today.
“If anything, they were a bit softer than might have been expected.”
Chief economist at Westpac Banking Corp Bill Evans believed this to be a “trough for wages growth” with unemployment trending down more rapidly than expected as economic conditions improve in 2010.
Helen Kevans, economist with JPMorgan Chase & Co agrees with Bill Evans sentiment, but takes it further saying “This was likely the low point in this cycle given the unemployment rate has already peaked,” and “with investment set to boom in the latter six months of the year, skills shortages and capacity constraints will again rear their heads.”
With wage growth pressure on inflation under control for the first half of the year the Reserve Bank is likely to hold off on interest rate rises in the immediate future, however he long term trend is still for increasing interest rates by the RBA.
