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By Wayne Cole
SYDNEY, Feb 22 (Reuters) - Australian wages grew at the
fastest annual pace in a decade last quarter but that was still
short of market forecasts and could lessen the pressure for
further aggressive hikes in interest rates, sending the local
dollar lower.
Figures from the Australian Bureau of Statistics out on
Wednesday showed its wage price index rose 0.8% in the December
quarter from the previous quarter, under forecasts of a 1.0%
increase.
Annual pay growth picked up to 3.3%, from a revised 3.2%,
but again was under forecasts of 3.5% and a likely relief for
policymakers who fear high inflation could lead to a damaging
price-wage spiral.
Markets had been braced for an upside surprise and quickly
reacted by pushing the Australian dollar down 20 ticks to
$0.6847 , while futures scaled back slightly
the likely future peak for interest rates. The Reserve Bank of Australia (RBA) has already hiked
interest rates a huge 325 basis points to a decade-high of 3.35%
as inflation surged to a 20-year peak of 7.8% late last year.
Yet it surprised investors this month by flagging even more
increases ahead in a desperate effort to cool domestic demand
and keep inflation expectations anchored.
As a result, markets had wagered interest rates could
peak as high as 4.35%, but that tempered toward 4.1% following
the wages news.
Policymakers have been concerned that wages will follow
prices higher and add fresh impulse to costs. The RBA had
forecast wage growth of 3.5% for last quarter, so the actual
outcome should be a pleasant surprise.
"Wage growth was weaker than the RBA had expected last
quarter and we think it won’t accelerate as rapidly as the RBA
anticipates," said Marcel Thieliant, head of Asia Pacific
economics at Capital Economics.
"As we expect the labour market to loosen more rapidly than
the Bank anticipates, we think it will peak at just under 4%
instead of the RBA’s forecast of 4.2%."
Business surveys are still pointing to fatter pay deals as
unemployment holds near 50-year lows, with the RBA noting around
one-third of firms it surveyed had reported wage rises above 5%.
The ABS data showed wages in the private sector led the way
in the December quarter with an annual rise of 3.6%, while the
public sector lagged at 2.5%.
(Reporting by Wayne Cole; Editing by Himani Sarkar and Sam
Holmes)
Messaging: wayne.cole.thomsonreuters.com@reuters.net))
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