Australian wage growth slowed from 15-year highs in Q1 2024, indicating a potential peak in this cycle and a loosening labour market, as reported by Reuters on Wednesday. This slowdown could alleviate concerns about a price-wage spiral and reduce the pressure on the Reserve Bank of Australia (RBA) for further rate hikes. The wage price index rose by 0.8 per cent in the March quarter, falling short of the forecasted 0.9 per cent rise and marking the smallest increase since late 2022. Annual pay growth also decreased to 4.1 per cent from 4.2 per cent, with the private sector experiencing its first fall since Q3 2020 to the same figure. Public sector wages saw a modest rise of 0.5 per cent in the quarter, bringing annual growth down to 3.8 per cent from 4.3 per cent. Despite these figures, the overall increase in annual wages surpassed the inflation rate of 3.6 per cent, marking a return to real pay growth. Additionally, income is set to benefit from a major round of tax cuts starting in July and new rebates on energy and rent costs announced in the annual budget. However, these "cost of living" initiatives are not expected to cause a surge in demand due to current weak trends in consumer confidence and per capita consumption. The RBA is predicted to start cutting rates in November, with the risk of delay until next year due to sticky service inflation. Market predictions suggest a minimal chance of a rate cut until April 2025, with an 8 per cent risk of another hike this year.
