Nov. 16 (Bloomberg) -- Australian wages rose last quarter at the slowest pace in almost two years, increasing the central bank’s scope to lower interest rates again as Europe’s debt crisis dims prospects for global growth.
The wage-price index, which measures hourly pay rates excluding bonuses, advanced 0.7 percent from the previous three months, when it gained 0.9 percent, the statistics bureau said today in Sydney. That was lower than all 16 forecasts in a Bloomberg survey of economists that ranged from 0.8 percent to 1.1 percent.
Today’s report validates the Reserve Bank of Australia’s decision to cut borrowing costs on Nov. 1 for the first time in 31 months, reducing the benchmark rate to 4.5 percent from a developed-world high of 4.75 percent as domestic inflation slows and global risks intensify. Salary pressure eased even as labor unrest grows and the minimum wage increased 3.4 percent.
“Employers managed to keep wage costs from re-accelerating despite a minimum wage rise and, anecdotally, plenty of industrial action,” said Roland Randall, an economist at TD Securities Inc. in Singapore. “The RBA has made it pretty clear they see wage pressures, and the implications that has for inflation and thus monetary policy, to be softer than they were previously expecting.”
Today’s result is “certainly a vote for another rate cut rather than no more action,” he said.
Bond Yield Drops
The yield on Australia’s three-year government bond dropped to as low as 3.36 percent after the release, the least since April 2009.
The local dollar maintained declines, buying $1.0136 as of 12:51 p.m. in Sydney, from $1.0178 yesterday in New York. Traders saw at least a 94 percent chance RBA Governor Glenn Stevens will cut rates another quarter percentage point at the Dec. 6 policy meeting, up from 88 percent before the release.
The wage price index advanced 3.6 percent in the third quarter from a year earlier, today’s report showed. That was less than economists’ forecast for a 3.8 percent gain and the slowest annual increase in a year.
Hourly rates of pay in the other services category advanced 4.5 percent from a year earlier, the biggest increase among the 18 industries surveyed by the statistics bureau. Compensation in wholesale trade rose 4.4 percent, while mining pay gained 4.2 percent.
Pay for public administration and safety workers increased by the least, rising 2.8 percent.
A separate government report today showed Internet vacancies for skilled workers dropped 1.9 percent in October, the fifth consecutive monthly decline.
Days lost to industrial disputes tripled in the three months to June 30, according to the most recent government data, as unions sought pay rises and job-security measures amid higher living costs. Disputes may increase as contracts covering more than 130,000 employees at listed companies expire before the end of 2012, according to Deutsche Bank AG.
That includes about half the workers at Woolworths Ltd., the nation’s biggest retailer, and 13,800 staff at Telstra Corp., the largest telecoms provider.
Driving the economy is demand from developing nations including China and India for iron ore, coal and natural gas.
“Outside of the mining sector and some related industries, most firms are not reporting unusual difficulty in finding suitable workers, and there has been a rise in households’ concerns about higher unemployment,” the RBA said in a quarterly statement on Nov. 4 in which it lowered its forecasts for economic growth and inflation for the next two years. “Unit labor costs, however, continue to increase at an above-average rate, with productivity growth remaining below average,” the central bank said.
The mining boom and higher borrowing costs spurred the nation’s currency, which reached $1.1081 on July 27, the highest level since it was freely floated in 1983.
Those gains made it harder for non-mining industries to compete, with BlueScope Steel Ltd. in August saying it will cut about 1,000 jobs because of a second-half loss due to high raw- material costs and exchange-rate gains.
Australia’s unemployment rate climbed in July and August before declining in October for the first time in seven months.
--Editors: Garfield Reynolds, Malcolm Scott
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