Reserve Bank needs to ditch its wage denialism

“Recent information from liaison and survey measures provided further evidence that wages growth had started to pick up from the low rates of recent years,” the Reserve Bank noted in the minutes of its August board meeting, released on Tuesday.

It’s a familiar refrain. “Other information received in June had affirmed the outlook for faster wages growth in the period ahead,” read the July minutes. “Labour market conditions were the tightest they had been in many years and wage pressures were emerging,” it said in June. In May, “members observed that price pressures were intensifying and there was upward pressure on wages”. In April: “reports from the Bank’s liaison program suggested that private sector wages growth had continued to pick up in the March quarter”.

You have to go back to the March meeting — the second last one where the RBA left interest rates on hold — to find the RBA expressing scepticism about wages. Back then, it noted that wages growth had only returned to pre-pandemic levels.