(Bloomberg) -- Australia’s wage growth slowed further in the final three months of last year, reflecting an easing in price pressures across the economy and vindicating the Reserve Bank’s decision to finally ease monetary policy.
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The Wage Price Index advanced an annual 3.2% in the fourth quarter of 2024, compared with an upwardly revised 3.6% in the prior period and matching economists’ estimate, Australian Bureau of Statistics data showed Wednesday. That was the biggest wages slowdown for any full year since 2009.
On a quarterly basis, wages grew 0.7%, slightly lower than forecast and down from an upwardly revised 0.9% in the third quarter of 2024. The quarterly result was the equal lowest since March 2022, according to Michelle Marquardt, ABS head of prices statistics.
The RBA’s board is closely monitoring price-setting behavior and the labor market, with employment data out Thursday expected to show the jobless rate edged up to 4.1% in January, from 4%. The central bank’s latest forecasts show that unemployment will peak at 4.2% this year.
It estimates that wage growth will accelerate this year to peak at 3.4% and then ease to 3.2% in the middle of next year.
RBA officials have previously said wage growth of around 4% is consistent with the central bank’s 2-3% inflation target provided the economy’s productivity performance improves. Yet they’ve sounded increasingly concerned about that of late as there has been little sign of a return to solid productivity gains.
On Tuesday, after delivering a widely anticipated rate cut, RBA Governor Michele Bullock said policymakers were “continuing to test how low we can keep unemployment without adding to inflationary pressures.”
She reiterated that the board needs to continue to see an easing in wage growth, repeating that improved productivity is key to ensuring wages can rise without rekindling inflationary pressures.
Wednesday’s data showed private sector annual wage growth was 3.3%, the weakest since June 2022, while the public sector at 2.8% growth fell below 3% for the first time since June 2023.
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