Via the marvelous George Theranou of UBS:
Since the start of the year we expected GDP to drop, gradually raising unemployment, vs consensus & RBA still expect a flat/falling UR. This is the key driver of our dovish view of a peak in wages growth (also reflecting public sector wage caps). Importantly, the RBA just changed its wages view to “likely to remain low & to increase more gradually than earlier expected. As a result, inflation is likely to take longer to rise to 2%”.
A second key driver of weak wages is the participation ratio surging to a record. This materially increased labour supply, more than offsetting strong jobs. We identify key drivers of higher participation are 1) mainly females, especially working age 25-54 (boosted by subsidies); 2) a smaller ~0.1%pt boost from migration booming 250k p.a., with recent arrivals participation of ~71% far above the 66% total; 3) older workers 55+ (reflecting the rising retirement age), muting the ~0.1% p.a drag from an ageing population; 4) stressed mortgagees switching from IO & P&I are seeking another job.
With women and the aged desperate for work, why add migrants to the pain?