Australia: Stagnant wages challenge RBA pause - TDS

TD Securities analysts note that the Australia’s Q1 Wage Price Index (WPI) expanded by +0.5% q/q and 2.3% y/y, the same pace as the prior quarter, and again marginally weaker than expected (mkt +0.6% q/q).

Key Quotes

“A third consecutive 2.3% y/y challenges the RBA base case that wage growth is expected to gradually improve. In reality it has stopped dead.”

“By industry, wage growth ranged from 1.8% y/y for Construction to 3.3% y/y for Health (private).”

“The RBA expects 2½% y/y wages growth this year, and along with core inflation at 1.4% y/y (the average, not just trimmed mean) actual reports continue to underwhelm RBA expectations/targets. Let's not forget that RBA Governor Lowe is on the record saying that 3% y/y wages growth is needed to generate 2.5% y/y underlying inflation.”

“The markets barely moved on the wages print, not surprising enough in either direction. As guided by the RBA, all eyes on tomorrow's (April) employment report.”