“At the margin, these data weaken the case for another rate hike. But the labour market remains very tight and is delivering strong wage growth, which means a June rate hike will still be a very close call.”
The number of people either in jobs or looking for work eased slightly in April, from 66.8 per cent in March to 66.7 per cent in April, according to the Australian Bureau of Statistics figures, while the employment-to-population ratio also fell 0.2 percentage points to 64.2 per cent.
But Jarvis said both those indicators remained well above pre-pandemic levels, and remain near their historical highs of last year.
On Wednesday separate data from the ABS showed wages were growing at an annual rate of 3.7 per cent, the highest rate in a decade. But due to inflation, the real purchasing power of Australians has continued to fall.
Since May last year, the Reserve Bank has raised interest rates from a record low 0.1 per cent to 3.85 per cent to tackle inflation, which eased to 7 per cent in the first three months of the year.
In meetings from the RBA board’s May meeting, members noted while wage growth has picked up it would remain consistent with the target of getting inflation back down to the target 2-3 per cent range by June 2025. But that hinged on productivity also rising, the board said.
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The Fair Work Commission is currently considering the annual wage review, which will lift the minimum wage for about 200,000 workers and have flow-on effects for up to 2.7 million on industry awards.
The government supports the minimum wage rising in line with inflation, but in a hearing on Wednesday Fair Work Commission president Justice Adam Hatcher questioned whether raising the minimum wage by 7 per cent would give the RBA little choice but to continue lifting interest rates.
On Thursday morning, Employment Minister Tony Burke said it was Hatcher’s job to examine all the arguments around the minimum wage rise.
“The reality is, we know we don’t have some sort of wage-price spiral,” he said on ABC’s RN Breakfast.
“There is no way in the world that inflation is being driven by incredibly high wage growth, because we simply haven’t had that.”
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