Wayne Cole

SYDNEY, (Reuters) – Australia’s central banks is now closer than ever to achieving its economic goals. However, they are prepared to wait as wage growth slows and inflation rises.

The minutes of Tuesday’s Reserve Bank of Australia (RBA), February meeting, were released. They showed that their Board wasn’t convinced the inflation acceleration would continue and they wanted to see how wages react before moving forward with interest rates.

The minutes revealed that “The Board is willing to wait as it tracks how inflation in Australia changes.”

Philip Lowe, RBA Governor last week stated that it is plausible that a rate hike could occur in 2012 if the economy continues to exceed expectations. He also said that the shift away from earlier guidance that there would not be an increase by 2022 seemed highly unlikely.

An inflationary trend across the globe is leading investors to bet on a rate hike in June. Inflationary pressures across the globe are causing markets to price in a 0.1% increase to 0.25% and 1.25% respectively by December.

The Omicron virus spread quickly in January, which caused consumer mobility to be restricted. However, the spending rate has been steadily rising as Omicron cases are resolved.

There is still plenty of work available, with unemployment at 4.2% (a record low) and the number of vacancies at an all-time high.

While wage growth has increased to 2.2% in the past year, it is still below the speed of the United States or UK. Therefore policymakers prefer that the figure be at least 3.0% to withdraw stimulus.

Paul Bloxham, chief economist at HSBC Australia, stated that after a prolonged period of low target inflation, “the RBA seems keen for the economy to run ‘hot’ for a while.”

The RBA is particularly interested in resetting inflation expectations and wage expectation, so that wage increases of 3-4 percent become the norm after years of wage growth of 2%.

He anticipates that the rate will rise in the third-quarter of the year and then again before the end of the year.