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In 2022, Australian workers experienced a glimmer of hope as end-of-year wage growth reached its highest level in a decade, with the wage price index (WPI) reaching 3.3 percent, according to the Australian Bureau of Statistics (ABS). However, this increase was not enough to keep up with inflation, as the gap between workers’ earnings and the cost of living continued to widen.
The December quarter saw a rise of 0.8 percent in wages, marking the highest December quarter increase in a decade, but lower than the 1.1 percent increase over the September quarter. ABS Head of Price Statistics Michelle Marquardt noted that wage growth during the December quarter contributed to the highest annual growth in hourly wages for Australian workers since 2012, following on from increases in the June and September quarters.Despite the recent wage growth, heavy increases in the consumer price index (CPI) have offset the gains made by Australian workers in recent years. The CPI increased by 7.8 percent over the year to December 2022. This indicates that while wages may be increasing, the rising cost of living means that workers are still struggling to make ends meet.
The Reserve Bank of Australia (RBA) has predicted that wages growth will increase to 4.2 percent year-on-year in 2023 before declining to 3.8 percent by mid-2025. However, the RBA expects that core inflation will only reach 2.9 percent year-on-year growth by mid-2025, highlighting the challenge of balancing wage growth and inflation in Australia’s complex economic environment.
As Australia, like other nations, continues to recover from the economic impacts of COVID-19, achieving a balance between wage growth and inflation remains a significant challenge. These projections, along with comments made by the Minister, indicate that the government and RBA are closely monitoring economic indicators to ensure that they are effectively managing the recovery process. However, uncertainties remain, and the situation will require continued attention and strategic decision-making to support the country’s economic recovery.
US stocks started strong, but ultimately finished with mixed results after the release of the FOMC meeting minutes, which indicated that the Fed intends to continue raising interest rates in order to bring inflation down to their 2% target. The flash services PMI data showed that economic activity improved, moving out of contraction territory for the first time since June 2022, and the manufacturing PMI also exceeded expectations. However, the existing home sales fell for the twelfth consecutive month, reaching the slowest pace in January due to increasing rates. Despite this, the Fed may be pleased to see a moderate housing market and an overall pickup in economic activity. The continuation of the rate hike cycle could potentially lead to a mild recession, which is a key factor in driving further market movements. The outperformance of tech shares may suggest that investors are currently optimistic about the economic outlook. Meanwhile, the US dollar continued to strengthen, as the projected terminal Fed rates are now significantly higher than before January. The President of the St. Louis Fed, James Bullard, expects that interest rates will peak at 5.37% later this year.
The value of gold futures decreased as the US dollar strengthened, with the dollar index reaching a high of 104.56 – the highest seen since January 5th. As bond yields and the value of the US dollar continue to rise, gold prices may remain under pressure. Meanwhile, crude oil prices declined for the second consecutive trading day due to economic concerns. Economic factors such as a potential slowdown in global growth, supply chain disruptions, and shifts in consumer behavior can contribute to lower demand for crude oil, leading to price drops. Additionally, geopolitical tensions and developments related to oil-producing countries can also impact crude oil prices. It’s worth noting that commodity prices can be highly volatile and subject to sudden shifts based on a variety of factors.
The above analysis is only for the views of market researchers and is for reference only and is not regarded as a specific investment suggestion.