Australia’s wage growth has continued to decelerate despite jobless rate bottoming out. The RBA used this as a vital factor in its decision to lower the policy rate in May. Wage growth is likely to have accelerated to 0.6% q/q in the first quarter of 2016, said Societe Generale in a research report. This might be enough to accelerate the year-on-year by 0.1 percentage points to 2.3%, added Societe Generale. This is because of persistent drop in jobless rate that peaked at 6.2% but has dropped to 5.8%.
But the risks are likely tilted towards the downside, mainly due to change in the composition of jobs growth from “high-paying jobs in mining towards lower-paid jobs in services”, noted Societe Generale. However, the data, seen from private consumption perspective, is unlikely to be that negative. Given that the inflation decelerated markedly in the first quarter to 1.3%, the projections suggest a rebound in the real wage growth to 1% y/y in Q1 from Q4 2015’s 0.5%, according to Societe Generale.
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