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Wednesday, 18 August 2021

Wages growth fizzer

Taper cancelled

Australia had been making progress on the unemployment rate, which fell to under 5 per cent before Sydney, Melbourne, Canberra, and Darwin were locked down, and Queensland had further restrictions.

There wasn't much evidence of improvement in the wage price index, though, which climbed to just 1.7 per cent over the year to June. 

The quarterly increase was very soft at just 0.4 per cent, missing market expectations.

The Reserve Bank would be hoping to see wages at above 3 per cent per annum, which seems a long way off now. 

There was a slight improvement in New South Wales and Victoria, to 1.8 per cent annual growth.

Queensland was just behind this pace at 1.7 per cent, with Tasmania leading the way at 2.2 per cent.

But while private sector wages growth picked up to 1.9 per cent, the public sector saw a new record low of just 1.3 per cent. 

With core inflation still below target, market analysts think that the Reserve Bank will now have to scrap its plans to taper QE this year, with over half of the Aussie population plunged back into lockdowns.

UBS put out a note this week expecting the taper to be delayed, and if anything there's a case for doing more, not less. 

Fairly dismal stuff, overall! 


More granular analysis from the data king James Foster here.