Wages data could force RBA to turn page on rates cut
Mortgage holders stressed by the prospect of another rate cut will have to hope Australians don’t earn as much as predicted.
The quarterly wage price index released on Wednesday appears to be one of the latest game-changing releases of this year.
The fact that this figure, which is both the market consensus and the Central Bank’s estimate, is repeated as 3.4 percent by June, will not mean a change in the already weak interest rate cut expectations.
If it falls, a rate cut could begin again, most likely in the first half of 2026. If it moves higher, this could signal that the bottom has been reached in the outage cycle.
“Another rate cut already has around a 40 per cent chance in the money market,” AMP chief economist Shane Oliver told AAP.
“If you go back a few months, there was an increase and decrease in whether there would be one or two cuts.
“So if the wage numbers get much higher than 3.4 per cent, that makes the chances of cuts even lower.”
Wage growth peaked in late 2023, when the annual rate exceeded four percent for the first time in 15 years.
It has since fallen to 3.4 percent, but that figure is still higher than for most of the past decade.
The Reserve Bank last met on Melbourne Cup day and will publish minutes from that meeting on Tuesday, which are expected to confirm Governor Michele Bullock’s low willingness to cut rates.
Higher-than-expected consumer price index inflation, which remained at 3.2 percent throughout the year through September, led central bankers to leave the cash interest rate target at 3.6 percent in October.
So while next week is unlikely to bring good news for debtors, they will at least be able to give their financial masters a political flogging.
On Tuesday and Wednesday, parliament will convene leaders of the Big Four for committee hearings ordered by Finance Minister Jim Chalmers.
Committee chairman Ed Husic said the chance to test top officials would be valuable.
“A lot of people feel, and have felt in the past, that banks are not subject to scrutiny,” he said.
“So it’s a good platform to ask important questions about how the banking system affects customers and employees.”
Mr. Husic said the committee will examine surcharges, regional services, scams and the impact of artificial intelligence on customers.
The terms of reference allow the committee to examine interest rates, and Mr. Husic said those questions would be about how those decisions were reached rather than arguing for lower rates.
“There have been cases where there has been a gap between the timing of the RBA’s decision on interest rates and the impact of that on banks,” he said.
Meanwhile, U.S. investors are watching next week’s quarterly results from artificial intelligence computing company Nvidia and worrying whether the Federal Reserve will hold off on cutting interest rates in December.
Wall Street ended Friday mixed after an early sell-off that sent all three major indexes down more than 1 percent.
The S&P 500 index decreased by 0.05 percent to 6,734.11 points. Nasdaq increased by 0.13 percent to 22,900.59 points, and the Dow Jones Industrial Average decreased by 0.65 percent to 47,147.48 points.
Australian stock futures lost 12 points, or 0.13 percent, to 14,228.
Australia’s main indexes closed at their lowest level in almost four months on Friday, with the market suffering its worst day in 10 weeks as the global decline in risk assets hit.
The benchmark S&P/ASX200 index fell 118.9 points, or 1.36 percent, to 8,634.5 points, while the broader All Ordinaries fell 127.5 points, or 1.41 percent, to 8,9087 points.
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