The Australian Bureau of Statistics publishes the official change in wage prices once per quarter. This usually means it has a bigger impact on the market as it’s more anticipated.
It’s also important because it’s one of the indirect measurements relevant to RBA policy.
The RBA is currently monitoring employment closely in order to maintain price stability. As the cost of labor (wage prices) increases, this typically translates to customers in the form of higher prices. This is because people’s purchasing power increases as well.
Within a growing economy, there ought to be a steady increase in wage prices, above the inflation rate.
Generally, wage inflation should “lead” the overall CPI measure. It should be higher than the inflation target.
And, moves in wage prices generally come ahead of (organic) moves in inflation. So, while as a measure it doesn’t always immediately move the market, it’s an important factor when gauging future inflation and RBA policy.
What We Are Looking For
Of the two measures that come out, the one that generally is the most relevant is the quarterly measurement. Australian Q4 wages are expected to have grown 0.5%, which would be in line with the prior quarter.
This would be pretty much in line with the trend over the last three years, an indication that despite the drop in employment and subsequent rates easing, it hasn’t had an impact on how much Australians are being paid.
On an annualized basis, wages are expected to have increased by 2.2%, in line with the 2.2% registered in the prior measurement. This is just barely above the inflation target, putting some constraint on the effectiveness of RBA policy.
On Thursday we get the latest employment data, which is broadly expected to keep within recent trends. For close to a year now, the jobs market in Australia has been weakening, and this has concerned the RBA.
Further weakness in the jobs market, and in particular, the lack of growth in wages, could spur the reserve bank into cutting rates again.
A recent report blamed around half of the lack of wage growth on a drop in productivity.
Industrial production in the country has been shrinking in the last several quarters. When adjusted for inflation, wages have one of the weakest growth performance in years.
During this quarter, things are likely not to have improved, with demand in China under pressure due to the coronavirus outbreak. Though it appears that the number of new patients is starting to level off, the first step before being able to say it’s finally under control.
We are half-way through the quarter, so any recovery after the outbreak is controlled likely will manifest itself in Q2 data.