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Business News/ Politics / News/  Australian wages growth accelerated in fourth quarter
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Australian wages growth accelerated in fourth quarter

Australian wages growth accelerated in fourth quarter

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Agencies

Australian wages growth probably accelerated in the fourth quarter as a shortage of skilled workers fuelled pay increases in the Asia-Pacific region’s fifth- largest economy.

Hourly rates of pay excluding bonuses gained 1% from the third quarter, when they rose 0.8 %, according to the median estimate of 26 economists in a survey. The Bureau of Statistics will release the report on 21 February at 11:30 a.m. in Sydney.

The unemployment rate has dropped to a 31-year low after the economy last year posted the fastest annual jobs growth since 1989. The shortage of skilled workers is fueling wage increases, which drives up companies’ costs and may stoke inflation even after three interest-rate increases last year.

“The shortage of skilled labor gives employers an incentive to chase employees, and one way they do that is through wage increases," said Matthew Johnson, Sydney-based senior economist at 4Cast Ltd., whose estimate matched the survey median. “As we approach a 4 % jobless rate, wage pressures will really come back up."

Annual wages growth quickened to 3.9 % in the fourth quarter from 3.8 % in the previous quarter, economists estimated in Bloomberg’s survey.The unemployment rate was 4.5 % in January, the lowest since May 1976, after companies and government agencies created more than 300,000 extra jobs last year.

“Labour market conditions remain tight, with firms experiencing shortages of skilled labor," the Reserve Bank of Australia said in its quarterly monetary-policy statement on 12 february. “Labour scarcity continues to constrain their activity to a greater extent than lack of demand."

The central bank’s view was supported in a survey of about 400 companies by National Australia Bank Ltd., which reported 1.8 % growth in wages in the three months ended 31January from the previous three months.

Annual wages growth of 5.25 % was the fastest since 1998, National Australia reported on 13 February. That’s pushing up costs, particularly at mining and construction companies.

BHP Billiton, the world’s largest miner, said on 25 January the expansion cost of the Alumar refinery, in which it has a 36 % stake, has increased on higher construction and labor expenses. The cost of its share of the project has climbed 40% to $725 million.

Wages growth can stoke inflation as companies pass on their higher costs to consumers. The Reserve Bank raised interest rates three times last year after annual inflation breached its target for three straight quarters.

The central bank’s overnight cash rate target has been at a six-year-high 6.25 % since November.Annual inflation was 3.3 % in the three months ended 31 December, slowing from 3.9%the previous quarter. The bank targets inflation of between 2 % and 3 %.

“If wages climb and productivity remains flat, that will get the Reserve Bank quite interested," said 4Cast’s Johnson.Seventeen of 26 economists surveyed by agencies expect interest rates won’t change this year, with two predicting an increase and seven forecasting a cut.

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Published: 18 Feb 2007, 10:25 PM IST
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