Australia Second Quarter Wages Growth Slows, Adding to Case for Rate Pause

Australian wages grew at a slower pace in the second quarter, increasing the central bank’s leeway to postpone future interest-rate increases.

The wage price index, which measures hourly pay rates excluding bonuses, climbed 0.8 percent from the first quarter, when it rose 0.9 percent, the statistics bureau said today in Sydney. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.9 percent gain.

Weaker wages growth may prompt Reserve Bank of Australia Governor Glenn Stevens to extend a pause in the most aggressive round of interest rate increases by a Group of 20 member. Annual growth in an index of leading economic indicators slowed in June for a third straight month, a separate report showed today.

Wage growth “is benign and will leave the Reserve Bank of Australia comfortably on hold,” said Rob Henderson, chief markets economist at National Australia Bank Ltd. in Sydney.

The Australian dollar traded at 90.35 U.S. cents at 12.32 p.m. in Sydney from 90.36 cents just before the report was released. The two-year government bond yield fell 2 basis points to 4.47 percent. A basis point is 0.01 percentage point.

Australian employment growth slowed in July, driving up the jobless rate to 5.3 percent from 5.1 percent as more people entered the labor market, a report showed on Aug. 12.

Skilled Workers

An index measuring the number of jobs available for skilled workers fell 0.3 percent in August from July, a government report showed today.

Still, local unemployment is almost half the level of the U.S., helped by China’s demand for resources that is fueling a mining investment boom.

To prevent an increase in inflation pressures stoked by the rebound in Australia’s economy, one of few to skirt last year’s global recession, Governor Stevens increased the benchmark lending rate six times between October and May to 4.5 percent.

Stevens kept borrowing costs unchanged two weeks ago for a third month after a report showed inflation cooled last quarter and amid doubts about the global recovery.

In minutes of the bank’s Aug. 3 meeting published yesterday, policy makers said there are also signs that “a greater degree of caution” among households may help cool inflationary pressures caused by the nation’s mining boom.

The wage price index advanced 3 percent in the second quarter from a year earlier, the same pace as in the previous three months, today’s report showed. Economists forecast a 3.1 percent gain.

Rate Bets

Traders are betting there’s close to no chance of a quarter percentage point increase in the central bank’s benchmark rate to 4.75 percent this year, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 11:44 a.m. today. The chance of an increase in November stood at 2 percent.

Hourly rates of pay at wholesale traders increased 1.7 percent from a year earlier, the smallest gain among the 18 industries surveyed by the statistics bureau. Utility worker salaries rose the most, gaining 4.7 percent.

A gauge of future economic growth expanded at an annualized rate of 6 percent, after gaining 7.4 percent in May, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index fell to 265.8 points from 265.9 in May.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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