Australia jobless rate needs to go lower for wage pressures to emerge -RBA


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SYDNEY, May 15 (Reuters) – Australia’s wages growth has troughed and there are some tentative signs of pressure emerging, but there is a risk it may take a lower unemployment rate than currently expected to generate a sustained move higher, a central banker said.

Wage growth is crawling near a record low pace of around 2 percent annually, even as the labour market tightens. Data out on Wednesday is likely to show wage growth stuck at that level, half the rate enjoyed by workers during the mining boom.

“How much longer is wages growth going to remain at its current low rates?” Guy Debelle, Deputy Governor of the Reserve Bank of Australia (RBA), said in a speech in Sydney on Tuesday.

“The experience of other countries with labour markets closer to full capacity than Australia’s is that wages growth may remain lower than historical experience would suggest.”

Debelle said the RBA expects gradual progress in reducing the jobless rate from 5.5 percent and returning inflation to the mid-point of its 2-3 percent target band.

It also expects more broad-based wage pressures to emerge as the economy continues to strengthen.

“The key word in this discussion of the outlook is gradual,” Debelle said.

“If the economy continues to evolve as expected, higher interest rates are likely to be appropriate at some point,” he added. “Notwithstanding this, the board does not currently see a strong case for a near-term adjustment in the cash rate.”

The RBA has left interest rates at a record low 1.50 percent since last easing in August 2016, the longest stretch of stable rates on record. It is widely expected to hold rates until early next year.

Debelle said strong global growth has boosted the RBA’s confidence around its outlook although trade tensions were a “significant risk” to the world economy.

U.S. President Donald Trump announced import tariffs on some goods, including steel and aluminium, earlier this year. He later singled out China and slapped further duties on Chinese goods, a move that has met with a tit-for-tat response from Beijing. (Reporting by Swati Pandey, Editing by Rosalba O’Brien)


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