New signs of wage pressures emerge | Liverpool City Champion
Reserve Bank Governor Philip Lowe is adamant about interest rate hikes before 2024.
But wage pressures are already emerging in parts of the economy as companies scramble to find the right staff.
The official cash rate remained at 0.1% after Tuesday’s monthly RBA board meeting.
“The cash rate is unlikely to be increased until 2024,” Dr Lowe told reporters after the meeting.
The board remains committed to reducing unemployment from 5.1% to over 4%, while wage growth of 3 to 3.5% is also crucial to bring inflation back within the target range of 2 to 3%.
However, a new report on Australia’s service sector found companies were constrained by an inability to fill the positions needed to maintain existing business levels or grow to meet higher demand.
Australian Industry Group chief executive Innes Willox said service sector wage growth accelerated in June and business costs continued to rise.
He said a healthy increase in new orders also indicates strong demand in the coming months.
“A key question for many companies will be whether they can fill the necessary positions to fill these orders,” said Mr. Innes.
The Ai group’s services performance index fell 3.4 points in June to 57.8, but the sector is still expanding.
A similar story of skills shortages and rising costs of building materials has also emerged in the construction industry.
Despite Dr. Lowe’s take on rates, the tide has already turned for two- to three-year fixed-rate mortgages.
Sally Tindall, of Rate City, said there were still rates below 2%, but not for long.
“In a few months, they could be extinct,” she said.
The average mortgage holder with a $ 500,000 loan fixed for two years at 1.94% could see that rate almost double when they mature, which would increase monthly payments by almost $ 400.
The central bank is also wary of the already high level of household debt and rising house prices.
In collaboration with the Australian Prudential Regulation Authority, the RBA Board of Directors closely monitors the housing market, credit growth and lending standards.
“What neither APRA nor the Reserve Bank wants to see is that credit is growing too quickly relative to people’s incomes,” Dr Lowe said.
Associated Australian Press