The bank desks weigh in on the upcoming Australian wage price index data due at 00:30 GMT, 08:30 HKT

ANZ: The wage price index is set to tick up in Q3 given the boost from the larger-than-usual minimum wage rise. We expect a rise of 0.6% in the quarter with the risks tilted towards to a stronger rise. This would leave wages 2.2% higher over the year.

CBA: The Q3 Wage Price Index should show an increase from the current record low rate of 1.9%. From 1 July 2017, the national minimum wage rose 3.3%, compared to 2.4% at the last review in 2016. Wage growth should remain constrained given the composition of jobs growth, with strong gains in lower income jobs such as Health Care.

NAB: The WPI on Wednesday will be closely watched to see whether subdued wages growth has bottomed in Australia. This quarter the market expects wages to increase 0.7% q/q and 2.2% y/y, boosted by the increase in the minimum wage which was hiked 3.3% on July 1. Although NAB’s forecast is similar, our forecast is on the straddle of the 0.6/0.7% divide and we accordingly think the risks could be slightly to the downside of the market consensus. Our analysis of prior minimum wage increases suggests the minimum wage could add an extra 0.1% to wages growth on top of the Q2 0.5% outcome, slightly softer than the market and the RBA’s estimate of a 0.2% boost.
 

Westpac: Wages have lagged the recovery in the Australian labour market. While it is part of a global phenomenon of wage deflation, there are domestic considerations as well. Rising part-time employment and underemployment have a role to play particularly in Victoria which has the fastest population growth and higher rate of employment growth. The rise in the national Minimum Wage has an impact in the September quarter Wage Price Index. The RBA has estimated a direct impact of 0.5ppt boost in the quarter due to the increase. Given that the previous Minimum Wage increases contributed 0.3ppt, the net impact of the increase is a 0.2ppt boost to the underlying pace. Our 0.7%qtr forecast will lift the annual pace to 2.3%yr, the fastest pace since September 2015.

Barclays: A modest pickup in wage growth appears likely amid strong growth in employment.

Societe Generale: After having remained stable at the series’ low of 1.9%, wage growth in Australia looks set to have improved in 3Q. The main reason is not the decline in the unemployment rate, which eased back to 5.5% in September, from 5.7% in 2016 and a (quarterly) peak of 6.2% in 2014/15, but rather the increase in Australia’s minimum wage. As of 1 July, the minimum wage was increased by 3.3% by the Fair Work Commission, a larger rise than in recent years. Nearly one-quarter of all employees in Australia are paid the minimum wage, although they account for about only 15% of the wage bill. Still, according to RBA estimates, this would directly add 0.5pp to the headline growth rate of the wage price index – in light of this we are a bit surprised about the consensus forecast which foresees only a 0.3pp increase. Outside of the minimum wage, wage dynamics were probably little changed, but we would expect some firming given the barn-storming gains in employment, especially full-time jobs. 

Such acceleration in nominal wages would mean that after declining outright in 2Q and stagnating in 3Q, real wage growth, i.e. adjusted for consumer price inflation, would have returned to a positive rate of 0.4% yoy, the best since 4Q16. This is still short of the long-run average of 0.7% (series only starts in 1997), but an improvement nonetheless.

TD Securities: It is our long-held view that wage inflation would pick up towards 2½%/yr not only via minimum wages but also via further improvement in wages in the cyclical industries (manufacturing, construction, professionals). An upside surprise compared with mkt 2.2%/yr could see the OIS steepen.
 

15 Nov 2017 - 00:10- Data- Source: ANZ/CBA/NAB/Westpac/Barclays/Societe Generale/Westpac

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