Australians saw a modest rise in wages in the September quarter, giving the Reserve Bank of Australia scope to cut the cash rate further if need be.
Total hourly rates of pay, excluding bonuses, rose by a seasonally-adjusted 0.5 per cent in the September quarter, according to the Australian Bureau of Statistics.
Wage rates were 2.7 per cent higher than a year ago.
The figures show both wage growth and inflation remained under control, HSBC chief economist Paul Bloxham said.
“Wage growth has slowed substantially. It is consistent with the idea that the labour market is loose and there is very little inflationary pressure in the domestic economy,” he said.
The low inflation rate meant the RBA could cut the cash rate, currently at 2.5 per cent, if it needed to.
“It leaves the RBA with room to cut interest rates if they wanted to, but we don’t think they are going to want to because the housing market is already picking up pace and we are seeing signs the broader economy is rebalancing.”
The weaker-than-expected figures explained why consumption growth remained soft but the data illustrated what has happened, not what is currently happening, ANZ head of Australian economics Justin Fabo said.
“This is really telling you about history,” Mr Fabo said.
“Prices react last to things. So, while they are quite soft, they are more reflective of what was happening in the labour market in the past and not really telling us much about what is happening more currently.
“It doesn’t change our view that, currently, we’re seeing some very early tentative signs that things have stabilised and improved a little bit.”
RBC economist Su-Lin Ong said the data was consistent with a weak labour market and confirmed the well-behaved inflation outlook.
“The data are consistent with the RBA’s easing bias, however mild, and gives it scope to cut should growth and the labour market disappoint,” Ms Ong said.
“The wage and labour market pulse suggests, at the very least, that the cash rate is set to remain at a historical low for an extended period.
“We think this period could extend into 2015.”