Slow wage growth concerns RBA
(19 May 2011 – Australia) The Commonwealth Bank (CBA) is the only major Australian bank that does not predict an interest rate rise when the Reserve Bank (RBA) meets to decide on June 7.
A rise would lift the official cash rate to 5 percent from the 4.75 percent, where it has been since November last year.
Wage costs rose less than expected in the first three months of the year, reducing pressure on the RBA to lift interest rates when it meets next month.
The data arrives as the Westpac-Melbourne Institute index of consumer sentiment reported a slip of 1.3 percent in May from 105.3 in April to 103.9 - the lowest level since last June - amid lingering concerns for the state of the economy and a rising cost of living. It was the fifth fall in 10 months, with the gauge fluctuating between rises and falls over the period.
The Reserve Bank flagged wage pressure as a key area of concern in the minutes of its May meeting, released on Tuesday.
'Domestically, one area of uncertainty was the behaviour of the household sector and whether the recent cautiousness of households would continue. Another uncertainty concerned the tightening of the labour market and whether a pick-up in wages in the resources sector would spill over into significant pressure on wages elsewhere in the economy,' the RBA said.
'Members observed that the behaviour of households and the labour market would be important determinants of the outcome for inflation over the next few years.'
Wage costs rose less than expected in the first three months of the year, reducing pressure on the RBA to lift interest rates when it meets next month.
The data arrives as the Westpac-Melbourne Institute index of consumer sentiment reported a slip of 1.3 percent in May from 105.3 in April to 103.9 - the lowest level since last June - amid lingering concerns for the state of the economy and a rising cost of living. It was the fifth fall in 10 months, with the gauge fluctuating between rises and falls over the period.
The Reserve Bank flagged wage pressure as a key area of concern in the minutes of its May meeting, released on Tuesday.
'Domestically, one area of uncertainty was the behaviour of the household sector and whether the recent cautiousness of households would continue. Another uncertainty concerned the tightening of the labour market and whether a pick-up in wages in the resources sector would spill over into significant pressure on wages elsewhere in the economy,' the RBA said.
'Members observed that the behaviour of households and the labour market would be important determinants of the outcome for inflation over the next few years.'
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