00:00 The annual wage growth was slightly above what was expected, but that was because of
00:06 a revision that we saw earlier in 2023. So the current pulse of wage growth is essentially
00:13 where we thought it would be right now.
00:15 What's the outlook for wages going forward then, Catherine?
00:18 Well, we're expecting that wage growth will remain around where it is through the first
00:24 half of 2024, because we're seeing a few different dynamics, some putting upward pressure, some
00:30 putting downward pressure on wage growth. So for example, we're not going to see the
00:34 same upward pressure from award wages that we saw in Q3, where there was a larger than
00:40 usual award wage increase, and we saw that 15% increase for some aged care workers as
00:46 well. We're also seeing reports that workers on individual arrangements, so not on enterprise
00:52 agreements or award, they are seeing wage growth slow already. But it's the enterprise
00:58 agreements that are likely to continue to put more upward pressure on wage growth, particularly
01:03 as more and more people roll over onto new agreements that can last for two, three, four
01:08 years at these higher average annual wage increases.
01:13 So both the quarterly and the annual increases in wages, so beat inflation as it stands currently.
01:20 What's the significance of that?
01:22 Yes, so for the first time, we've seen annual wage price index growth above inflation in
01:29 quite a while. So that means that households are now getting past the point where their
01:35 purchasing power was being significantly eroded by inflation, their wage growth is picked
01:40 up to match it. We think as inflation continues to decline, households purchasing power will
01:46 actually continue to improve as well. And that seems to be showing up in households
01:51 confidence. Confidence has started to pick up because inflation is coming down, wage
01:56 growth is stronger, we're getting closer to tax cuts, and we're probably getting closer
02:00 to rate cuts as well. All that bodes better for the household sector.
02:05 So how does this fit into that overall interest rate picture? When can we expect possible
02:09 rate cuts, Catherine?
02:11 Well, we're not expecting the RBA to cut rates until November this year. We think they're
02:17 going to want to ensure that inflation is going to come back sustainably to their target
02:23 band of 2% to 3%. We think the wage data today won't really influence them one way or the
02:29 other. The RBA has said a number of times that they think that the current pace of wage
02:34 growth are a little higher is consistent with their inflation target of 2% to 3%, as long
02:40 as productivity growth picks up more. So we'll be looking at the GDP and national accounts
02:46 data on the 6th of March, where we'll get the next read on productivity growth. That's
02:50 going to be quite important.
02:51 [BLANK_AUDIO]
