RBA’s inflation taming could end with fairytale soft landing
With wages the pickup in wages growth just right from the RBA’s perspective, it won’t take much of rise in unemployment to achieve the disinflation that is need.
Not-too-hot and not-too-cold. Much like Goldilocks’ porridge, the recent pickup in wages growth in Australia has been just about right, at least from the Reserve Bank of Australia’s perspective.
Last week’s figures showed the wage price index rose 3.7 per cent over the past year, up from about 2 per cent in the pre-pandemic period. As the RBA has stated repeatedly, assuming that productivity growth runs at its recent decade average of about 1 per cent a year, annual wages growth of 3 per cent-4 per cent is consistent with the central bank’s 2 per cent- 3 per cent inflation target.
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Paul Bloxham is HSBC’s chief economist for Australia, New Zealand and global commodities.
