Weak demand slows wage growth
Australian wages rose at a weaker pace than economists estimated in the third quarter, restrained by weaker demand in retail and tourism industries.
The wage price index, which measures hourly pay rates excluding bonuses, advanced 0.7 per cent from the previous three months, when it rose 1 per cent, the Australian Bureau of Statistics said today in Sydney. That compares with the median forecast for a 0.8 per cent gain in a Bloomberg News survey of 20 economists.
The Reserve Bank cut interest rates by 1.5 per centage points from November last year to October to 3.25 per cent to help cushion the economy from Europe’s crisis and a slowdown in China. It kept the benchmark unchanged this month in response to signs the global economy is stabilizing and core inflation is accelerating.
“We expect the continued fade in labor demand over the last six to nine months to have started weighing on wage growth,” Stephen Walters, JPMorgan Chase's chief economist in Australia who predicted a 0.7 per cent rise, said in a research report before the release.
The wage price index advanced 3.7 per cent in the third quarter from a year earlier, today’s report showed. Economists forecast a 3.8 per cent gain from a year earlier.
Hourly rates of pay at retailers increased 2.3 per cent from a year earlier, and accommodation and food services wages and information media and telecommunications pay both rose 2.9 per cent -- the three weakest gainers among the 18 industries surveyed by the statistics bureau. Wholesale trade jumped 5.3 per cent and mining wages advanced 5.2 per cent, the two biggest increases, the report showed.
“Business surveys and liaison suggest that private sector wage growth may have softened a little over more recent months,” the Reserve Bank of Australia said in its quarterly policy statement released last week.
Australia’s economy is being driven by China, the nation’s biggest trading partner, which is buying up iron ore, coal and natural gas as millions of people in the world’s most populous nation move to urban centers. That has helped spur the nation’s currency above parity with the US dollar and hurt industries outside of resources.
Traders are pricing in a 65 per cent chance the central bank will lower borrowing costs by a quarter-per centage point to 3 per cent at its meeting next month, swaps data compiled by Bloomberg show. The local dollar traded at $US1.0447.
Australia’s unemployment rate rose to a 2 1/2-year high of 5.4 per cent in September and held at that level in October. The economy added full-time jobs for a fourth straight month, the longest streak of gains since 2010, advancing by 18,700 in October, employment data released last week showed.