Legend has it that, when asked by US President Richard Nixon in 1972 what he thought about the impact of the French Revolution, Chinese Premier Zhou En Lai replied: “it’s too early to say”.
Waiting for progress on wages and unemployment in Australia may not be a multi-century enterprise (the French Revolution was in 1789) but Reserve Bank Governor Philip Lowe’s testimony to the House of Representatives Standing Committee on Economics on Friday was reminiscent of Zhou’s caution:
In the central scenario that I have sketched today, inflation will be below the target band for some time to come and the unemployment rate will remain above the level we estimate to be consistent with full employment.
While this remains the case, the possibility of lower interest rates will remain on the table. The board is prepared to ease monetary policy further if there is additional accumulation of evidence that this is needed to achieve our goals of full employment and inflation consistent with the target. Time will tell.
Wage growth isn’t really climbing
It provides two things to worry about.
First, wage growth isn’t rising. Annual growth has remained unchanged for three quarters.
- ^ testimony (rba.gov.au)
- ^ old man time (youtu.be)
- ^ Wage Price Index (www.abs.gov.au)
- ^ ABS 6345.0 (www.abs.gov.au)
- ^ unemployment figures (www.abs.gov.au)
- ^ ABS 6202.0 (www.abs.gov.au)
- ^ Germany (www.destatis.de)
- ^ Are Trump's tariffs legal under the WTO? It seems not, and they are overturning 70 years of global leadership (theconversation.com)
- ^ speech (rba.gov.au)
- ^ competing views (theconversation.com)
- ^ thought they would rise (theconversation.com)
- ^ secular stagnation (www.afr.com)
- ^ another full percentage point (rba.gov.au)
- ^ Vital Signs. If we fall into a recession (and we might) we'll have ourselves to blame (theconversation.com)
- ^ house position (theconversation.com)
- ^ RBA update: Governor Lowe points to even lower rates (theconversation.com)
Authors: Richard Holden, Professor of Economics, UNSW