On Friday, the Reserve Bank formally upgraded its forecast for inflation to peak at 8 per cent this year and remain above the 2-3 per cent target band until at least 2025.More worryingly, the forecast for peak underlying inflation – the bank’s preferred measure –, suggesting a broadening of price pressures.
“The longer these domestic pressures persist and inflation stays high, the more this could lead workers to make larger wage claims, especially in a tight labour market,” the RBA said.UBS chief economist George Tharenou said the RBA appeared increasingly focused on wages and on striking a more hawkish note than in the past.
About a quarter of the companies reported wages growth north of 5 per cent in the past year, with the strongest rise in construction and business services.“Around half still expect wages growth at their firm to be above its historical average over the next year.”The average annualised wage rises for newly approved enterprise bargaining agreements are still picking up gradually to about 2.9 per cent, however, and households are not yet convinced their wages will climb sharply.
Firms in the RBA’s business liaison program reported that year-ended growth in base wages had increased to a little above 3.5 per cent, which would be the fastest growth rate in about a decade.“The increase over recent months reflects firms’ responses to strong labour demand, the award wage increases announced by the Fair Work Commission and higher inflation outcomes,” the RBA said.
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