Earlier previews of the Australian wages data for the July — September quarter here:
- Australia Q3 Wage Price Index is due Wednesday — preview
- Australia — Q3 Wage Price Index due today — preview
These now via:
- The Q3 Wage Price Index should show an increase from the current record low rate of 1.9%. From 1 July 2017, the national minimum wage rose 3.3%, compared to 2.4% at the last review in 2016.
- Wage growth should remain constrained given the composition of jobs growth, with strong gains in lower income jobs such as Health Care.
- The WPI on Wednesday will be closely watched to see whether subdued wages growth has bottomed in Australia.
- This quarter the market expects wages to increase 0.7% q/q and 2.2% y/y, boosted by the increase in the minimum wage which was hiked 3.3% on July 1. Although NAB’s forecast is similar, our forecast is on the straddle of the 0.6/0.7% divide and we accordingly think the risks could be slightly to the downside of the market consensus.
- Our analysis of prior minimum wage increases suggests the minimum wage could add an extra 0.1% to wages growth on top of the Q2 0.5% outcome, slightly softer than the market and the RBA’s estimate of a 0.2% boost.
- It is our long-held view that wage inflation would pick up towards 2½%/yr not only via minimum wages but also via further improvement in wages in the cyclical industries (manufacturing, construction, professionals).
- An upside surprise compared with mkt 2.2%/yr could see the OIS steepen.
—A good result should be AUD supportive, a poor one not so much.