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Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)
The Reserve Bank expects slow wage growth will continue for a while yet, as a new survey revealed more than half of its respondents have not had a pay increase in the past year.
However, the minutes of its September 5 board meeting shows the central bank expects salaries will eventually pick up gradually in response to the strengthening labour market.
“Solid growth in employment was expected to continue, which would support household incomes and thus spending in the period ahead,” the minutes released on Tuesday say.
The minutes preceded the most recent national accounts, which showed economic growth rebounded in the June quarter, and figures showing employment rising for an 11th month in a row in August.
Those job figures provided a boost to the weekly ANZ-Roy Morgan consumer confidence index – which points to future household spending – jumping 4.6 per cent to its highest level in eight weeks.
ANZ head of Australian economics David Plank was encouraged by the result, following last week’s “monster” jobs report which showed employment increased by a further 54,200 in August.
However, the weekly Essential Research poll also found one-in-five felt they were under financial pressure, while 43 per cent were managing their household bills, but struggling to afford anything else.
Only a third considered themselves financially comfortable.
Almost half were concerned about electricity and gas bills, followed by about a third who put paying the mortgage and rent as their biggest cost-of-living expense.
These worries could increase if National Australia Bank economists are correct when they say a recent spate of upbeat economic news confirms the next move in interest rates will be up.
NAB is predicting the Reserve Bank’s cash rate to rise in August 2018 from a record low 1.5 per cent to 1.75 per cent, followed by further rises to 2.5 per cent by the end of 2019.
NAB global head of research Peter Jolly concedes these forecasts might change.
“What is important is that NAB is saying we have seen a turning point in Australia’s interest rate cycle driven by a run of better domestic data and continuing strength in the global economy,” he said in a report.
Commonwealth Bank economist Gareth Aird expects the cash rate to stay unchanged until late next year.
“But the continued solid improvement in the labour market means that the risk is the RBA moves earlier,” he said.
The Reserve Bank minutes gave no clues to the time of a rate move, but warned a further appreciation of the Australian dollar could result in a slower pick-up in economic growth and inflation.