Money Wage data has suddenly become one of the most important economic releases in Australia

02:07  12 february  2018
02:07  12 february  2018 Source:   businessinsider.com.au

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Of all the upcoming Australian economic data , none will be as important as the December quarter Wage Price Index (WPI) released on February 21. Will there be a gradual lift in wage pressures, providing further confidence that the deceleration in wage growth has bottomed? Or will we receive

© Provided by Business Insider Inc Of all the upcoming Australian economic data , none will be as important as the December quarter Wage Price Index (WPI) released on February 21. Australia 's wages data beats -- but there's still a big problem with most people's pay.

Kat Dennings, Beth Behrs are posing for a picture© Provided by Business Insider Inc Of all the upcoming Australian economic data, none will be as important as the December quarter Wage Price Index (WPI) released on February 21.

Forget next Thursday's employment report -- the wage data that carries the greater potential to shift the dial on the outlook for Australian interest rates.

That point was made clear on Thursday with RBA Governor Philip Lowe telling the A50 Australian Economic Forum dinner in Sydney that "a lift in wage growth is likely to be necessary for inflation to average around the midpoint of the 2–3% medium-term inflation target."

"Necessary."

That's a huge caveat attached to the RBA's view that inflationary pressures will build gradually in the period ahead, all but ensuring that there'll be an large amount of focus on the WPI report.

Will there be a gradual lift in wage pressures, providing further confidence that the deceleration in wage growth has bottomed? Or will we receive another shockingly-low outcome as was seen in the September quarter report, showing no real signs of acceleration despite an unusually large lift the minimum wage rate at the start of July?

No one is really certain, including the RBA.

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  How plummeting Wall St stocks could impact your wallet The rise and fall of the US stockmarket has a direct impact on the livelihoods of all Australians, and it's tethered to wage growth.Either way, it causes intense nervousness among investors and governments around the world.

It has been one of the more reliable signals of the end of global economic expansions—and bull markets in assets like stocks and houses. E-commerce sales are one of Canada’s newest data points, only dating back to January 2016, but it may increasingly become one of the most important .

Australia also has two cities that would make the list of the 15 largest US cities if a giant earthquake suddenly shifted However, consumer goods and non-essential items have become cheaper due to more Wages . In Australia the minimum wage is something like an hour. The median wage in

While the bank sees wage pressures gradually building over the next couple of years, as pointed out by Sally Auld, Chief Economist and Head of Australia and New Zealand Fixed Income and FX Strategy at JP Morgan, its commentary on wages in its quarterly Statement on Monetary Policy (SoMP) released yesterday wasn't overly reassuring.

"The detailed commentary on wages in the SoMP doesn’t contain much that is positive," she said, pointing to just some of the downbeat commentary from the RBA below.

  • “…There have been broad-based declines in wage growth outcomes for the majority of workers who have remained with the same employer in recent years”;
  • “…The gap between the lower wages of those entering into employment and those already working has widened”;
  • “…The share of workers changing employers has been at a low level in recent years and the boost to earnings from changing jobs has declined since the mining boom”;
  • “…New enterprise bargaining agreements are tending to incorporate smaller wage rises than the agreements they replace”;
  • “…Growth in average earnings from the national accounts (AENA) remains subdued and noticeably weaker than growth in the WPI”;
  • Despite strength in construction (activity and employment), “…there is little evidence of broadening wage pressures across the construction sector” and “…The weakness in average earnings was particularly pronounced in goods-related industries such as construction.”
  • Not overly convincing, right?

    This chart is one explanation why household consumption remains weak despite record low interest rates

      This chart is one explanation why household consumption remains weak despite record low interest rates The Reserve Bank of Australia (RBA) has been cutting interest rates since late 2011, with the cash rate falling to just 1.5%, the lowest level on record. It's provided a boon to Australian households with a variable rate mortgage, helping to lower interest repayments at a time when wage growth has been weak.However, that windfall for borrowers hasn't translated to a noticeable pickup in household consumption, the largest part of the Australian economy.According to Australia's last GDP report, consumption grew by a paltry 0.1% in volume terms in the September quarter of last year, the weakest result since the GFC.At 2.

    Employment though has held up better than might have been expected, resulting in weak nominal wage growth, and contributing to low. New Zealand is Australia ’s most important trade and financial partner, and is vulnerable to a sharp slowdown in Australia ’s economic prospects.

    Labour-saving capital investment becomes more attractive when low-skilled workers are made more expensive by minimum wage laws. Moreover, the minimum wage in Australia has already been the subject of empirical study, and its effects are just as suggested by the economic theory posited herein.

    Further to those remarks, Auld notes the RBA's own economic forecasts don't point to any meaningful pickup in wage pressures in the years ahead, at least based on its expectations for unemployment.

    "The forecasts assume some spare capacity remains in the labour market at the end of the forecast horizon," she says, referring to unemployment being expected to remain above 5%, slightly above what many regard as being Australia's full employment level.

    "It should also give investors reason to question whether wages growth will pick up meaningfully enough to shift core inflation onto a more target-consistent trajectory."

    Indeed, even the RBA pointed to heightened uncertainty as to whether wage pressures will build as unemployment continues to fall, noting that "it is unclear how much any decline in spare capacity will translate into building wage pressures".

    To Auld, given that uncertainty, it means that wage data will play a prominent role in determining what happens next with interest rates.

    "Recent data has come in around the RBA’s expectations, so there is little reason for the Bank to deviate from the current 'perma-hold' strategy on rates, nor to change its economic forecasts," she says.

    "Much will be determined by the path of wages, and so until anything changes on this front, the status quo on policy will persist for some time yet."


    Weak wages risk to budget outlook: IMF .
    The International Monetary Fund is anticipating a gradual pick-up in Australian economic growth with a return to full employment by 2020.Weak wages growth is threatening the Turnbull government's forecast for a budget surplus in mid-2021, the International Monetary Fund warns.

    Source: http://au.pressfrom.com/news/money/-55027-wage-data-has-suddenly-become-one-of-the-most-important-economic-releases-in-australia/

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