Wages

When the RBA raised rates, many were expecting them to wait for the wage price inflation data, to be released shortly thereafter.

Today, we got that data, and it’s not especially interesting.

The below is hardly the sort of wage-price inflation spiral beginnings that we all need to worry about.

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But inflation is what we expect it to be (more formally, expected inflation is more consequential than a Philips curve trade off, which many macro economists will have in their minds) and many consumers will be forming their expectations based upon what they see and read (which at presents contains a lot of hyperbole about rising costs) including news from abroad (e.g. the US inflation experience) and from personal anecdote (what they see at the petrol pump, or from the banks in terms of their mortgage).

So – no impact to the RBA’s stance. Like all global central banks (with the exception of Japan) the RBA will remain of a hawkish mind, and will continue to tighten policy.

We have a sizeable “rates-beta” exposure across our direct equity portfolios for precisely this reason.

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