Jobless rate needs to go lower for wage pressures to emerge: RBA

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Jobless rate needs to go lower for wage pressures to emerge: RBA

Board agreed there was not a "strong case" for a near-term adjustment in monetary policy, Tuesday's six-page minutes showed.

For sure wages growth may have troughed from the record slow rates of 1.9% in the September 2016 quarter to the June 2017 quarter, but the recent figures (up to two decimal places) also changes my metaphor from "cruising at a low altitude" to "slight descent" (barely noticeable perhaps but still a descent).

"There is a risk it may take a lower unemployment rate than we now expect, to generate a sustained move higher [in wages growth]", asserts Debelle. Financial markets are wagering the steady spell could last well into 2019.

Australian government bonds slumped across the board on Tuesday after the Reserve Bank of Australia (RBA) in its May meeting minutes said that the next move from the central bank will be a hike, instead of an interest rate cut.

Australian wages rose a feeble 0.5 per cent last quarter and private-sector growth stayed near historic lows, a disappointing outcome that risks putting a lid on spending and restraining already tepid inflation.

Meanwhile, the S&P/ASX 200 index traded 0.16 percent lower at 6,112.5 by 03:50 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 53.56 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend).

The miserly pace of wage growth is a major reason RBA does not see core inflation reaching the mid-point of its 2 to 3 per cent target band during its forecast period ending mid-2020.

"The increase in wages growth and inflation was expected to be gradual however because spare capacity in the economy was expected to be reduced only slowly".

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