Wages growth not an obstacle
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AAP
2013-02-20
Wages growth in the December quarter is low enough to give the Reserve Bank of Australia the scope it needs to cut the cash rate to maintain growth.
Total hourly rates of pay, excluding bonuses, rose by a seasonally adjusted 0.8 per cent in the December quarter, official figures show, matching market expectations.
St George senior economist Jo Heffernan said wages growth should not push the inflation rate too high.
"Wages inflation is well contained," she said.
"It's a fair bit below the RBA's line in the sand (implicit target) of 4.5 per cent for wages inflation."
The wage price index rose 3.4 per cent from a year earlier, the Australian Bureau of Statistics said on Wednesday.
"With wages inflation at that level, it would please the RBA," Ms Heffernan said.
"If they saw that economic growth was responding to the interest rates cuts they have delivered so far that would give them the scope to cut interest rates further.
"I think that would give them more flexibility in terms of managing the economy."
