Key for the near‑term wages outlook will be the National Minimum/Award Wage decision due by early June, with the risk that a large rise sets a benchmark for other wage agreements. While we see the RBA as likely on hold in June, we continue to expect the RBA to raise the cash rate another 25bp by August, pencilling in July.
The RBA views its forecasts for WPI growth to peak at 4% over 2023 before moderating to 3.7% as consistent with inflation slowing to 3% by mid-2025, but only if productivity picks up back to pre-pandemic trends. That is a reasonable hope, but productivity is exceedingly difficult to read over short time horizons. An update on GDP per hour worked comes alongside the GDP data on 7 June, the day after the RBA’s June meeting
As for the near-term wages profile, today’s data doesn’t suggest downside risks to recent RBA and Treasury forecast a peak in WPI growth of 4.0%. On the National Minimum/Award Wage Decision we expect the FWC to deliver a near inflation matching increase with an announcement expected by early June. The decision directly effects a bit over a fifth of the workforce, or about 15% weighted by earnings, and last year had wider implications with many employers and employees taking the increase as a benchmark. An interim increase of 15% for certain aged care award classifications applying to more the 250k workers also supports in Q3, directly adding about ¼ppt to WPI growth on our calculations. The Treasury estimates a ½ppt combined contribution from minimum and award wages and the aged care decision, and while these coming administered wage adjustments are largely known, we see the risk that official forecasts have underbaked the implications for broader wages growth.
- NAB
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