Australia Wages Growth Slows to 0.9% as Economy Cools

By Jacob Greber

Nov. 12 (Bloomberg) -- Australian wages growth slowed in the third quarter, adding to signs the economy is weakening.

Hourly pay rates excluding bonuses climbed 0.9 percent from the previous quarter, when they rose a revised 1.1 percent, the statistics bureau said today in Sydney. The median estimate in a Bloomberg survey of 18 economists was for a 1 percent gain.

Central bank Governor Glenn Stevens has cut borrowing costs by 2 percentage points since early September in the most aggressive round of reductions since 1991 on concern slower global growth will erode Australia's economic expansion. Business confidence has plunged to a record low and retail sales fell the most in more than three years, recent reports showed.

``It's a sign wages growth has peaked,'' said Anthony Thompson, a senior economist at Westpac Banking Corp. in Sydney.

``Growth will slow given the general deterioration in the labor market,'' which will push the jobless rate toward 6 percent late next year from 4.3 percent in October, he added.

``Wages are no impediment to further easing on monetary policy,'' Thompson said.

The Australian dollar traded at 65.87 U.S. cents at 12:03 a.m. from 65.93 before the report was released. The two-year government bond yield was unchanged at 3.55 percent.

The Reserve Bank of Australia this week cut its 2008 economic-growth forecast to 1.5 percent from 2 percent and said it had been forced to make ``unusually large'' reductions in the overnight cash rate target in October and November because renewed global financial turmoil raised the risk the economy will stall.

Business Confidence

The central bank also signaled it may reduce the rate further to avoid ``an unduly sharp weakening'' in demand. Governor Stevens and his board cut borrowing costs by a quarter point on Sept. 2, 1 percentage point on Oct. 7 and three- quarters of a point last week.

Stevens will cut the benchmark rate by another half point to 4.75 percent on Dec. 2, according to 12 of 19 economists surveyed by Bloomberg News. Five expect a quarter-point reduction, one tipped a three-quarter point cut and one forecasts a 1 percentage point decline.

Business Confidence

National Australia Bank Ltd.'s business sentiment index, published yesterday, slumped 21 points in October to minus 29 from September, the lowest level since the series began in 1989. Consumer confidence rose 4.3 percent, a report showed today.

House prices fell 1.8 percent in the third quarter, the biggest drop since 1978, job advertisements slid for a sixth month and home-loan approvals declined for an eighth month, recent reports showed.

The so-called wage price index advanced 4.1 percent from a year earlier in the September quarter, matching the second quarter's gain, today's report showed.

Hourly rates of pay at hotels and restaurants rose 2.3 percent from a year earlier, the smallest annual increase among the 16 sectors surveyed by Australia's statistics bureau. Mining salaries increased the most, jumping 6.3 percent.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net