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Australia's Q1 wages growth disappoints, bolsters lower-for-longer rates view

Published 16/05/2018, 12:18 pm
© Reuters.  Australia's Q1 wages growth disappoints, bolsters lower-for-longer rates view

* Q1 wage growth 0.5 pct q/q vs 0.6 pct forecast

* Annual wage growth 2.1 pct in Q1, meets expectations

* Private sector wage growth stays near all-time lows

* Healthcare, education best-paying in private sector

*

By Swati Pandey

SYDNEY, May 16 (Reuters) - Australian wages rose a feeble 0.5 percent last quarter and private-sector growth stayed near historic lows, a disappointing outcome that risks putting a lid on spending and restraining already tepid inflation.

The local dollar slipped 0.4 percent to $0.7447 AUD=D4 as the data cemented views that the Reserve Bank of Australia (RBA) will hold rates at a record low 1.50 percent for a prolonged period as it awaits a revival in consumer prices.

Wednesday's figures from the Australian Bureau of Statistics showed the wage price index rose 0.5 percent in the three-months ended March, from the previous quarter, lagging expectations for a 0.6 percent increase.

Growth for the December quarter was also revised lower to show a gain of 0.5 percent.

Annual wage growth climbed 2.1 percent, in-line with forecasts, but only just above the all-time trough of 1.9 percent and barely ahead of consumer price inflation.

Annual wage growth in the private sector stayed stuck at 1.9 percent with not a single industry paying more than 2.8 percent. The strongest growth rates were in healthcare and education, with mining wages up just 1.4 percent - nowhere close to the rate enjoyed during the decade-long mining boom that began early 2000s.

The miserly pace of wage growth is a major reason RBA does not see core inflation reaching the mid-point of its 2 to 3 percent target band during its forecast period ending mid-2020.

On Tuesday, RBA Deputy Governor Guy Debelle said it may take a lower unemployment rate than currently expected to generate a sustained move higher in wage growth. central bank last cut rates to a historical low of 1.5 percent in August 2016, notching up the longest period without a change in modern history. Financial markets are wagering the steady spell could last well into 2019.

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