No idea at NAB:
We still believe that conditions are in place for wages growth to rise in the future.
Our modelling of factors that affect wages — inflation, labour market under-utilisation, productivity and the terms of trade — suggest that we would already have expected to see stronger wages growth.
Clearly this has not happened and may reflect the need for the unemployment rate to get closer to its long-term ‘neutral’ rate of 5% or lower, before sufficient wage pressures emerge.
With the unemployment rate stuck around 5.5% recently, we now don’t expect the unemployment rate to get close to the 5% mark until mid-2019. That said, businesses continue to indicate — through our Quarterly Business Survey — that they are finding it increasingly difficult to find suitable labour; historically this has been associated with a decline in the unemployment rate, as well as the under-utilisation rate and, ultimately, wages growth.
Wage growth has peaked. Unemployment to keeping rising. Next move in the cash rate is down.
