Jobs, wages data all but rule out rate hike next month

Borrowers can breathe a sigh of relief, with the latest wages and jobs data all but ruling out another interest rate hike this year.

Wages growth in Australia has been moderate despite significant rises in the construction sector.

Both the wages data from the ABS on Wednesday and then the jobs and jobless numbers on

Thursday were essentially good news numbers.

They were also even more definitely ‘yesterday’ numbers that no longer captured what is happening in the economy right now.

The jobs numbers were headlined ‘October’ – but were actually for only the first two weeks of that month. In today’s hurly-burly 24/7 reality, almost prehistory.

The wages data was even more ancient, for the September quarter.

But more particularly, it reflected one-off stuff that we already knew about – especially the National Wage decision that delivered wage rises of between 5.5 and 8 per cent to a large chunk of the workforce.

On that basis, both the 1.3 per cent quarterly rise in the wage price index (WPI) and the 4 per cent annual rise – the first, the highest in the index’s history; the second the highest since 2009 – were not only relatively low, but probably also the high points.

The big point is that, now, approaching the end of our second year of high inflation, we are not seeing anything remotely like the (sensibly) feared ‘wages-prices’ spiral that would lock in both higher inflation and higher interest rates in 2024 and beyond.

In 2022 inflation was 7.8 per cent, yet the WPI rose only 3.3 per cent.

Over the first nine months of 2023 inflation was 4.6 per cent annualised (5.4 per cent for the year to end-September) and the WPI rose 4.1 per cent annualised.

So, despite wage increases falling way behind inflation through 2022, in 2023 workers were only able to gain a modest lift – from 2022’s 3.3 per cent to 2024’s 4.1 per cent (so far) – in average wages. And most of that increase came from the National Wage decision.

Clearly, the biggest force keeping a lid on wages growth has been that mammoth – 500,000-plus – migrant flood, pouring workers into especially the services sector.

At the same time, tradies and other workers in building and construction have been reaping much bigger wage increases – more like high-single digits – thanks to the massive infrastructure spending, sucking both labour and materials out of home building, and sending the prices of both soaring.

This uneasy, migration-driven balance is captured by these extraordinary numbers.

Over the year the number of people in jobs leapt by a staggering 419,000; yet we still added 64,000 to the jobless numbers, kicking the jobless rate up from 3.5 per cent a year ago to 3.7 per cent in October.

Put this all together and there is no cause for the RBA to even contemplate, far less actually deliver, another rate hike at its last meeting for the year in three weeks.

Indeed, when in three months we/it gets all this same data – inflation and wages not accelerating, and the jobless numbers continuing to rise – about what is happening in the economy right now, as opposed to yesterday, I suggest it will confirm that it would have been preferable for the RBA not to have hiked on Cup Day.

Originally published as Jobs, wages data all but rule out rate hike next month