Putting together the latest quarterly update on the Australian economy could hardly have been a fun job for the Reserve Bank.
Key points:Wages and jobless data this week are expected to back-up the RBA’s bleak view of bothThe RBA says a 5 per cent fall in the $A will help boost wages, push inflation into its target band and deliver higher economic growth sooner than currently forecastMarkets shrugged off reports President Trump said he had not agreed to rolling back tariffs on China
Not only did the September quarter’s Statement on Monetary Policy (SoMP) blow out to a record 87 pages, it was bulked up with downward revisions to forecasts and admissions that fundamentally important measures of the economy’s health would not be met for the foreseeable future.
The RBA’s best guess is unemployment edging down from 5.2 per cent to 5 per cent by the end of 2021.
This is still well short of its idea of full employment of 4.5 per cent, or lower.
Not surprisingly, the RBA pretty well waved the white flag on wage growth or, in the words of the SoMP, “wages growth is no longer expected to pick up”.
Wages growth is now forecast to stagnate at just 2.3 per cent annual growth off into RBA’s distant forecasting horizon.
External Link: WPI vs EBAs More weak data on the way
It is likely that the RBA will at least be able to say “I told you so” when the latest wage and jobs data drop this week; both should be underwhelming.
Forward-looking indicators such as business surveys and job ads have been deteriorating, while the most recent batch of Enterprise Bargain Agreements have hardly warmed the hearts, or filled the wallets, of workers.
Wage increases offered to