AAP
Wages growth is picking up, consistent with a tightening labour market, figures released on Wednesday show.
The index of total hourly rates of pay, excluding bonuses, rose by 1.1 per cent in the September quarter seasonally adjusted, the Australian Bureau of Statistics (ABS) said.
It was larger than the previous six quarterly increases and brought annual growth in the index to 3.5 per cent, up from 3.0 per cent previously.
In the more market-sensitive private sector, the quarterly rise was 1.2 per cent, a gain not previously exceeded in the 13-year history of the labour price index, and only once equalled: in the June 2008 quarter.
Annual wage growth in the private sector was 3.9 per cent by this measure, up from 3.4 per cent.
At these annual growth rates, wages do not pose a real threat to the two to three per cent consumer price inflation target the Reserve Bank of Australia (RBA) imposed on itself over 17 years ago.
The cost per unit of output would be brought back into the target range with only modest growth in labour productivity.
But the RBA would be concerned that a further tightening in labour market conditions, as demand for labour grows faster than supply, might cause wages inflation to ratchet higher, which would threaten a sustained breach of the target band.
Accordingly, the wages data released on Wednesday are consistent with the expectation that the RBA will lift the cash rate further in the coming few months in order to prevent inflation from becoming entrenched at an undesirably rapid pace.
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