Wage growth in Australia unlikely despite labour shortage

The Reserve Bank of Australia noted that in sectors where wage growth was observed, it was largely due to earlier implemented wage cuts that were reversed.
By: | October 21, 2021

The Reserve Bank of Australia (RBA) has said that there has not been any signs of wage growth and that there is little to suggest that wages will rise in the short-term despite reports of labour shortages in the industry.

“Overall, there were few indications from disaggregated wages data or from the Bank’s liaison program to suggest that aggregate wages growth was likely to accelerate sharply in the period ahead,” it said. 

The RBA argued against raising interest rates from rock-bottom levels as actual inflation remains below the central bank’s target range of 2 to 3%, it highlights in its latest Monetary Policy Meeting minutes, reports Business Insider

“Recent lockdowns and earlier reports of labour shortages had not appeared to affect most firms’ expectations for wages growth, which were generally returning to around pre-pandemic norms,” it noted.

This trend carried over into sectors which experienced significant labour shortages, it said. And where wage growth was observed, this was largely due to “earlier wage cuts that had been reversed”.

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It added that “less accommodative monetary policy” would constrain rising housing prices, but “it would result in fewer jobs and lower wages growth, which would in turn create further distance from the goals of monetary policy – namely, full employment and inflation sustainably within the target range”.