The Reserve Bank has claimed that there are no signs of growth in wages despite the post-COVID skill shortages. Minutes of the bank’s October meeting show that the bank board was perplexed by the lack of growth in wages despite the challenges raised from some businesses about a shortage of skilled staff.
The bank, which is spending $4 BN a week on government bonds as part of its quantitative easing program, has said it will not start lifting rates until inflation is sustainably within its 2-3 percent target band. To get inflation to that level the bank believes wage growth, currently at 1.7 percent, needs to get above 3 percent. It is arguing the cash rate is unlikely to be increased until 2024.
The October minutes show that while the board noted businesses were announcing a struggle finding staff, this had not influenced their expectations about wage growth, which was expected to recover to its pre-pandemic level.
Several countries had reported a lift in wage demands as employment growth had strengthened, but not in Australia.
“Even in industries that had experienced strong labour demand, wage growth remained subdued,” the minutes showed.
In reviewing wage growth across different types of wage-setting arrangements, members noted that a small share of people on individual agreements had received larger wage increases over recent quarters, in part reflecting earlier wage cuts that had been reversed.
Overall, there were few indications from disaggregated wage data or from the bank’s liaison program to suggest that aggregate wage growth was likely to accelerate sharply in the period ahead.