Wages growth eased a touch in the March quarter and consumer confidence dipped to an 11 month low, according to figures out yesterday, so what will the Reserve Bank say or do?
Nothing except to rub their beardless chins and go, hmmmm, can we see that repeated in the next few months, in the next quarter, and let’s see its impact on inflation before we take the finger off the rate rise looms trigger.
This is exactly what the Reserve Bank wants to see, a sluggish, barely moving domestic economy with less pressure on wages costs and the labour market, while the great investment boom gathers strength in WA and Queensland.
Three of the four big banks (the CBA is the odd bank out) believe rates will rise next month, despite the fall in jobs in April and lower retail sales and home loan approvals in March.
Yesterday’s Labour Price Index showed an easing in the rate of growth in wages in the March quarter
The first quarter wage index rose 0.8% in the quarter, down from the unrevised 1% growth in the three months to December.
On an annual basis they increased 3.8%, down from the 3.9% in the previous quarter.
In both cases, the figures were less than forecasts from economists for a rise of 1.1% for the quarter and 4% for the year (Economists also missed the labour force, retail sales and housing approvals).
The highest wage rises was in the mining areas Northern Territory (1.2% in March quarter, 4.1% for the year to March) and in WA (0.9% in March quarter, and 4.1% as well in the year to March).
In Victoria the seasonally adjusted wage rise, which excludes bonuses, was slightly above the national average at 0.9% in March and 3.9% for the year to March.
The ABS said the increase in indexes (in original terms) at the industry level ranged from 0.4% for Administrative and support services to 1.6% for Education and training.
"Increases in the original indexes though the year to the March quarter 2011 at the industry level ranged from 3.1% for Rental, hiring and real estate services, Arts and recreation services and Other services to 4.6% for Mining and Professional, scientific and technical services.
"In the Private sector, only Queensland recorded a lower quarterly increase in the March quarter 2011 than in the March quarter 2010.
"The lowest quarterly increase in the Private sector in the March quarter 2011 was jointly recorded by Queensland and Tasmania (0.6%).
"The highest quarterly increase was recorded by both New South Wales and Western Australia (1.0%).
"Through the year movements in the Private sector ranged from 3.4% for Tasmania to 4.9% for the Northern Territory.
In Victoria, the Private sector through the year movement to the March quarter 2011 was 4.0%. This was the first time since the December quarter 2008 that a through the year movement has been 4.0% or above for this state."
The ABS said quarterly movements in the Public sector in the March quarter 2011 were equal to or greater than those in the Private sector for all states and territories, with the exception of South Australia and Western Australia.
In the Public sector, Tasmania recorded the highest quarterly movement of all states and territories in the March quarter 2011 (2.1%) and Queensland recorded the highest through the year movement (4.0%).
Queensland, South Australia and Western Australia jointly recorded the lowest quarterly movement (0.6%) and the Northern Territory the lowest through the year movement (3.2%).
The All sectors through the year movements ranged from 3.1% for Rental, hiring and real estate services, Arts and recreation services and Other services, to 4.6% for Mining and Professional, scientific and technical services.
In the Private sector, Professional, scientific and technical services recorded the highest through the year movement to the March quarter 2011 (4.7%), and the lowest was recorded by both Rental, hiring and real estate services and Arts and recreation services (3.0%).
All industries, with the exception of Education and training, recorded higher through the year movements to the March quarter 2011 than to the March quarter 2010.
In the Public sector, Education and training had both the highest quarterly and through the year movements to the March quarter 2011 (1.5% and 4.0%, respectively), the ABS said in commentary on the figures.
The Reserve Bank flagged wage pressure as a key area of concern in the minutes of its May meeting, released yesterday.
In the minutes of the May board meeting, the RBA said "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."
"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."
So no change either way, but another series of weak reports would make the central bank a lot happier.
And the fall in consumer confidence in May would also please the central bank.
The Westpac-Melbourne Institute index of consumer sentiment slipped 1.3% in May from 105.3 in April to 103.9 – the lowest level since June of last year.
It was the fifth fall in 10 mon
