SYDNEY (REUTERS) - Australian wages grew at the slowest pace in two and a half years last quarter, a turnaround that should help contain inflation and provide scope for further monetary easing if needed.
Wednesday's data from the Australian Bureau of Statistics showed annual growth in total hourly rates of pay dropped to 3.4 per cent in the fourth quarter of last year, from 3.7 per cent the previous quarter. That was under forecasts of 3.5 per cent and the lowest reading since mid-2010.
The outcome will provide comfort to the Reserve Bank of Australia (RBA), which is counting on a moderation in wages to help keep inflation within its target band over the next couple of years.
"This is a benign outcome," said Mr Michael Turner, an economist at RBC Capital Markets. "The data are very much in the 'affords scope to ease' category, though do not make such a move more likely in our books."
The RBA cut rates in both October and December, taking them to a record-matching low of 3 per cent, in part to offset competitive pressures on the domestic economy caused by a stubbornly high currency. It skipped a chance to ease further at its February meeting but left the door wide open for a move if growth disappointed.
Currently, investors see only a one-in-four chance of a cut at the RBA's next meeting next month, largely due to an improving global backdrop. The RBA recently sounded less concerned about the outlook for inflation, in part because it expects the unemployment rate to creep higher for the next year or so and add to slack in the labour market.
Underlying inflation surprised last quarter by easing back to an annual 2.25 per cent, the lower half of the RBA's long-term target band of 2 per cent to 3 per cent.
The central bank sees wage growth stabilising around 3.25 per cent a year, comfortably short of the 4.0-4.5 per cent pace that is generally considered a threat to inflation.