Reserve Bank of Australia governor Philip Lowe says while some businesses are finding it hard to hire workers, wage increases have been modest.
In his first public appearance since March, Dr Lowe told an audience in Toowoomba that while the labour market was tightening, wages growth and inflation remains subdued.
“It is noteworthy that even in those pockets where firms are finding it hardest to hire workers, wage increases are mostly modest,” Dr Lowe told the Australian Farm Institute conference on Thursday.
“There are some exceptions to this, but they are fairly isolated.”
The RBA wants to see inflation sustainably within the two to three per cent target before it considers raising the cash rate from its record low 0.1 per cent.
This, it says, will need wage growth to double from its current low rate of 1.5 per cent and unemployment rate substantially lower than its present rate of 5.5 per cent, events it does not expect until 2024 at the earliest.
Dr Lowe said he expected the consumer price index to spike to about 3.5 per cent in the June quarter due to the unwinding of some pandemic-related price reductions.
“There have also been price increases for some items due to pandemic-related interruptions to supply. But beyond this, inflation pressures remain subdued and are likely to remain so,” Dr Lowe said.
The governor was speaking just hours before the latest labour force figures.
Economists expect another solid rise in employment was recorded in May, which should at least keep the unemployment rate steady at 5.5 per cent.
Economists’ forecasts centre on a further 30,000 increase in employment in May, although there is a wide expectation range, from a 60,000 rise to a 19,000 decline.
The unemployment rate is expected to hold at 5.5 per cent even after six consecutive months of declines, although again forecasts range from 5.3 per cent to 5.7 per cent.
The report comes at a time of strong demand for workers, with job advertising having grown for 12 months in a row to be almost 40 per cent higher than pre-pandemic levels.