Central bank rates outlook may pivot on wages, labour
Australia’s central bank will be right to take a no-change stance when it announces its final interest rate decision this year, according to new data on wages and employment.
The Commonwealth Bank of Australia on Monday published a new monthly report that it hopes will be a leading indicator for official figures published by the Australian Bureau of Statistics in the future.
The bureau’s next quarterly wage index won’t be released until February, while November labor force findings will be released Thursday.
CBA’s first Wage and Labor Insights report, compiled from de-identified wage streams of nearly 400,000 bank accounts, points to a 0.8 percent increase in wages in November and annual growth of 3.2 percent.
The annual rate is up from the previous month’s 3.1 percent, but well below the 4.1 percent peak at the end of 2024, according to CBA’s calculations.
At the same time, data show that seasonally adjusted employment growth in November was 26,000, a slight increase from the previous two months, and the unemployment rate was 4.4 percent.
CBA Head of Australian Economics Belinda Allen said the slight rise in wages and relatively stable employment growth supported the central bank’s cautious stance on interest rates.
“But it’s certainly worth watching given other concerns in the Australian economy,” he told AAP.
“If we continue to see an acceleration in employment growth and wage growth, that could give the RBA more reason to think about whether their policy settings are right or whether they need to act and tighten.”
The two-day board meeting of the central bank will end with the interest rate decision to be announced at 14.30 on Tuesday.
The overwhelming consensus among economists is to keep the cash interest rate, currently at 3.60 percent, unchanged.
CBA agrees and so far predicts no changes in 2026.
However, October inflation data released by the bureau last week showed annual prices increased by 3.8 percent; this was well above the three per cent upper end of the RBA’s target range.
The latest temperature test for the economy revealed growth of 2.1 per cent for the year ending September, suggesting Australia is still in good shape.
“The balance of risks shifts from whether interest rates will be kept steady to whether the RBA will have to consider a rate hike in 2026 if inflation accelerates from here,” Ms Allen said.
Some market observers are already considering whether the central bank’s next move could be a rate hike, potentially from mid-2026.
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