Smoko in Perth where wages have jumped the highest in the country – up 4.1 per cent, with construction still one of the hardest hit by lack of staff. Picture: Paul Kane/Getty Images.
A bombshell blow to interest rates is now forecast as stubborn wages and a red-hot Aus jobs market keep RBA’s finger twitching over the hike button.
In a devastating blow to struggling homeowners across the country, economists at the Commonwealth Bank warned Aussies to prepare for another rate hike at the Reserve Bank monetary policy board’s next meeting in May.
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CBA wage insights run ahead of ABS. Source: CBA
That would push the cash rate to a crushing 4.10 per cent – back to the same level as February last year when the RBA began its short-lived 2025 easing cycle.
This as explosive new wage data showed the Australian labour market is still too hot for the RBA’s liking – with another 21,000 new positions added in January, according to CBA’s closely-watched Wage and Labour Insights, released Tuesday.
It found Australian workers’ wages jumped 0.8 per cent over just three months – rising 3.1 per cent annually – showing no easing off in its pace and keeping inflation stuck above RBA’s comfort zone.
CBA said in a briefing on the report that it was an important checkpoint: “It gives us an early read on turning points in the Australian economy, much more quickly than we get from the ABS – and it’s also two really important indicators that the RBA looks at when deciding what to do with interest rates”.
The data tracks actual salary flows from around 400,000 bank accounts, giving policymakers and analysts a brutally honest snapshot of what’s really happening in workplaces across the country right now.
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Wage gains across the country. Source: CBA
Western Australia led the wage surge with the strongest gains in the country, while workers across eastern states continued to see solid pay rises.
Unemployment was also falling sharply in latest figures to December – the exact opposite of what the RBA wants to see amid concerns about capacity – with CBA’s internal tracking suggesting the labour market isn’t getting materially tighter, but also not loosening up either.
CBA’s Head of Australian Economics Belinda Allen said the data pointed to an overheating economy. “We see limited spare capacity in the labour market and the broader economy,” she said, warning that inflationary pressures remain heightened.
CBA economist Harry Ottley said “taken together, the January data point to a labour market that is still tight and on a solid footing, but not one that is materially strengthening”.
“While wage growth is firm but not excessive, weak productivity growth means businesses continue to face elevated labour cost pressures. This underpins our assessment that labour market conditions remain tight and are still contributing to inflation.”
The silver lining was that CBA does not expect RBA to kick off another round of brutal rate hikes again after May.
Mr Ottley said official ABS data and CBA’s internal indicators would be watched “closely” in coming months, to determine if the labour market is genuinely starting to cool or just taking a breather.
“The December official labour force survey was very strong and showed unemployment falling sharply, but that survey can be volatile. Our internal indicators do not suggest a material re-tightening in the labour market at this stage,” he said.
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