Slow wage growth could put brakes on Oz rate rises

SYDNEY - Australian wages grew at the slowest pace in a decade in the fourth quarter, giving the central bank more room to keep interest rates unchanged next week.

The wage price index, which measures hourly pay rates excluding bonuses, climbed 0.6 per cent from the third quarter, when it rose 0.7 per cent, the Statistics Bureau said yesterday in Sydney.

Reserve Bank of Australia Governor Glenn Stevens is monitoring wages to gauge whether inflation pressures are building amid surging Chinese demand for iron ore, coal and gas.

Stevens raised the benchmark interest rate three times last quarter, and 11 of 21 economists surveyed by Bloomberg News say he will increase it again on March 2.

"This was likely the low point in this cycle given the unemployment rate has already peaked," said Helen Kevans, an economist at JPMorgan Chase in Sydney. As unemployment falls and "with investment set to boom in the latter six months of the year, skills shortages and capacity constraints will again rear their heads".

The wage price index advanced 2.9 per cent in the third quarter from a year earlier, slowing from an annual increase of 3.6 per cent in the previous three months, yesterday's report showed.

Australia is experiencing its biggest employment surge in five years after employers added 194,600 jobs in the five months through January.

The jobless rate fell to an 11-month low of 5.3 per cent in January.

- BLOOMBERG