Wage growth will be well below inflation

Two key pieces of economic data this week could impact undecided voters as a six-week long federal election campaign draws to a close.

Thursday’s labor force report for April could see the jobless rate fall below 4% to its lowest level since 1974, a result a struggling Morrison government will soon claim as a victory for its management economic.

But 24 hours earlier, Wednesday’s crucial wage figures will confirm that despite all the government’s nagging about a strong economy, voters’ wages are rising at about half the rate of inflation.

The wage price index – data used by the Reserve Bank of Australia and the Treasury to gauge wage growth – is expected by economists to have risen at a slightly more optimistic pace of 0.8% in the quarter of March.

However, this would still leave the annual rate at 2.5%.

Although this is the highest rate since 2014, it is significantly lower than the annual inflation rate, at 5.1% in the March quarter.

Even if the economists are wrong and the wage result turns out to be stronger due to a tight labor market, there will be little joy for borrowers.

“An upside surprise would show that wage pressures are more widespread than the RBA thought in May, raising the risk of an oversized rate hike by 40 to 50 basis points in June,” Taylor Nugent said. , an economist at the National Australia Bank.

As it stands, the RBA is set to raise the cash rate by 25 basis points to 0.6% at its June board meeting, following its first rate hike in addition to a a decade earlier this month.

The RBA will publish the minutes of the May board meeting on Tuesday.

However, given that RBA Governor Philip Lowe gave a rare press conference after the board meeting, as well as the central bank providing its quarterly monetary policy statement, the minutes do not offer maybe not much new.

This statement indicated that wages were not expected to rise faster than inflation until the end of 2023.

The week begins with the Australian Institute of Petroleum releasing its weekly report on petrol prices on Monday.

After the initial impact of the government’s temporary halving of tax excise as part of the cost of living package in the March 29 budget, petrol prices have risen again towards $2. per liter due to stubbornly high world oil prices.

The week of data ends with Thursday’s Labor Force report for April, which is expected to see unemployment fall to 3.9% from 4% with 30,000 people expected to have joined the labor force.

Meanwhile, Australian stocks look set for a positive start to the week after Wall Street rallied broadly on Friday following another volatile week.

However, that didn’t stop U.S. stocks from finishing lower for a sixth straight week, the longest streak since 2011.

The underlying concern remains that the US Federal Reserve may not be able to slow the economy enough to contain the highest inflation in four decades without triggering a recession.

The S&P 500 rose 93.81 points, or 2.4%, to 4,023.89 and the Dow Jones Industrial Average gained 466.36 points, or 1.5%, to 32,196.66, while the Nasdaq rose 434.04 points, or 3.8%, to 11,805.

Australian stock futures rose 54 points, or 0.76%, to 7110 in sympathy.

On Friday, Australia’s benchmark S&P/ASX200 ended up 134.1 points, or 1.9%, at 7075.1.

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