“Further, the outlook for public sector wages, and rates of wages growth featuring in new enterprise bargaining agreements, suggested aggregate wage outcomes were unlikely to increase materially beyond pre-pandemic rates in coming quarters.”
Before the pandemic, the RBA cut official interest rates to a then-record low of 0.75 per cent in a bid to get wages growth beyond 3 per cent.
Earlier this month, governor Philip Lowe used a major speech to argue that high levels of immigration over recent years had contributed to slower wages growth.
He has also argued that businesses, used to price competition, had focused on cost-cutting measures at the expense of higher wages for staff.
The minutes show the RBA expects more workers to enter the jobs market, even with international borders closed, suggesting ongoing weakness for wages growth.
“Ultimately, a tighter labour market would be required to overcome the inertia in wage- and price-setting norms and the focus on cost control established over much of the prior decade in Australia,” the minutes showed.
ANZ’s head of Australian economics, David Plank, said wages growth was central to future moves in the official cash rate.
He said while the ANZ believed wages growth would be stronger than that feared by the RBA, it was clear incomes had to lift faster if the central bank was going to increase official rates any time soon.
Another factor may be the fallout from the expanding lockdown of the Australian economy.
Westpac on Tuesday downgraded its forecasts for growth, saying it now expected the economy to contract by 0.7 per cent in the September quarter, with a total cost of $8 billion.
Chief economist Bill Evans and senior economist Andrew Hanlan said output from NSW alone would fall by 3.1 per cent through the quarter if the lockdown extended for eight weeks while Victorian output would drop by 0.1 per cent.
They said while the economy faced a negative quarter of growth in September, the December quarter would show a bounce of 2.6 per cent.
The Morning Edition newsletter is our guide to the day’s most important and interesting stories, analysis and insights. Sign up here.