Wednesday 31 October 2018

That wage explosion keeps getting bigger

The ABS released the CPI yesterday. It rose a miserly 0.4% or 0.1% in seasonally adjusted terms.
The RBA's preferred measures rose 1.7% and 1.8% in annual terms.

In other words we do not have an inflation problem thus we do not have a cost of living problem. The official cash rate is a mere 1.5% and is umlikly to rise in any sort of future.
Why is this?
WAGES.
Wages show no sign of rising at all despite us reaching our NAIRU.
There are a lot of explanations for this.
Underemployment is high and restraining wage rises.
Trade Unions are weak and restraint wage rises.
Whatever. We now have a very de-regulated labour market. We have to live with the consequences.
It ain't a positive electorally.
That wage explosion just keeps on keeping on.

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