Wage data spark interest rate debate | the islander

Rising inflation and falling unemployment have sparked speculation that the Reserve Bank of Australia will have to raise interest rates this year, which would be the first hike in more than a decade.

However, RBA Governor Philip Lowe has repeatedly promised to be patient and wants to see annual wage growth accelerate to at least 3% before raising the cash rate from a record low of 0. .1%.

At this point, many economists expect the conditions for a rate hike to be in place by August, while some – and financial markets – are predicting an earlier decision in June.

Annual wage growth was just 2.2% in the September quarter.

The December Quarter Wage Price Index – the key gauge of wage growth used by the RBA and the Treasury – will be released on Wednesday.

Economists’ forecasts focus on a 0.7% rise in the quarter, which would bring the annual rate to 2.3%.

A quarterly rise of 0.8% or more would be the highest since 2014 and would likely accelerate discussions of a prior move in the cash rate.

As it stands, the March quarter inflation report is shaping up to be another blockbuster as oil prices on their own continue to hit new highs as global oil prices rise for fear of an all-out war between Russia and Ukraine.

Treasurer Josh Frydenberg warned on Tuesday that rising energy costs could undermine the global economic recovery from the pandemic.

The ANZ-Roy Morgan weekly consumer confidence survey found that inflation expectations rose another 0.1 percentage point to 5.1%, the highest level since December 2014.

Rising inflation expectations can themselves increase cost pressures if used to fix prices or wage demands.

The consumer price index was 3.5% in the December quarter, while core inflation – which dampens volatile price swings – jumped from 2.1% to 2.6% .

It was also the highest since 2014 and comfortably within the RBA’s 2-3% target range.

The March quarter inflation report is due on April 27.

The Australian Bureau of Statistics will also begin releasing the December quarter figures that feed into the economic growth outcome contained in the national accounts due March 2, starting with construction data.

Economists expect construction work completed in the December quarter rose 2.1% after falling 0.3% three months earlier.

Australian Associated Press

Stephen V. Lee