The March quarter national accounts do not suggest that the Reserve Bank of Australia (RBA) needs to be contemplating a more aggressive path, according to GSFM.
GSFM investment strategist, Steve Miller, said with the household consumption deflator up 1.5% and the domestic demand deflator up 1.4%, the strongest quarterly rise since 2000, inflation was on the rise.
“That, however, is old news,” he said.
Miller said wages growth as measured by average compensation per employee remained modest at 2.2% year on year, although average hourly earnings were up sharply.
“The wage numbers are a little difficult to interpret given COVID induced employee absences in the quarter,” he said.
For this reason, Miller said it was still somewhat of a puzzle why wages were not more visibly accelerating given tight labour markets.
“At this stage I’m putting it down to inertia in the official data as anecdotal evidence suggests wage growth is accelerating – as it should given tight labour markets. Nevertheless the puzzle should be acknowledged.”
He said the national accounts figures were not enough to forestall a further increase of 25 basis points in the policy rate when the RBA met again on 7 June.
“What they do mean is that unlike other developed country central banks, there is a limited need to consider ‘super-sized’ increments of 40 or 50bps.”
