The RBA has made clear that it will not tighten monetary policy until such a time that inflation is sustainably within its 2-3% target. Equally, it has declared that to get there it will need higher wages growth, well above 3%. JPM today hoses the entire notion of it:
- JPM says it is “very unlikely” that the RBA will push wage growth above 3% by 2024.
- It is trying to deliver a shock to inflation expectations to achieve it.
- Unemployment will need to fall to 4%.
I agree that reaching these targets is “very unlikely”. Although closed borders and stopped immigration are for the first time in a decade raising the possibility of it, a range of other factors are likely to slow the recovery before too long and make it tough.
