Daily Commentary BY THE CURVE TEAM –

Wages and Consumer Confidence Edge Higher

15th of November, 2018

It was a much needed positive day of local economic data yesterday with both wage growth and consumer confidence moving in the right direction. The trend of both hinge on employment outcomes with the latest update on those due out today.

With plenty of negative news permeating the local landscape at present, yesterdays double dose of positive news was a welcome relief.

The latest consumer survey provided a positive surprise with the monthly survey coming in on the high side, following the lead from the weekly survey outcomes the past two weeks. Almost all the subcomponents were higher over the week with confidence in family finances and the economy both improving.

Unemployment expectations appear to be underpinning with the index declining a further 1.9% in November, suggesting consumers are more confident in the employment outlook. While employment remains strong, many of the other issues threatening the outlook can remain contained.

The latest wage data was the other injection of positivity yesterday even if it was just for the fact that it is ever so slightly heading in the right direction. Wages lifted 0.6% for the quarter as expected lifting the annual rate to a three year high of 2.3%. Public sector wages continue to lead the way, outpacing the private sector.

As today’s chart shows, the outlook for wages is linked to the spare capacity in the labour force. We need to see a continued fall in the level of underemployment to keep upward pressure on wages.

Today we will get the latest update on the employment situation with the ABS set to release the October employment numbers at 11:30am. The market is currently expecting jobs growth to bounce back with 20,000 jobs expected. Even with the lift in jobs growth, the market expected the unemployment rate to edge higher after last month’s large fall.

David Flanagan

Director - Interest Rate Markets