Inflation will end RBA’s QE. Now comes the wage test

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Inflation will end RBA’s QE. Now comes the wage test
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OPINION: Even as inflation firms, one revealing statistic will give the RBA confidence about the outlook for prices and, crucially, wages.

about the same time that it ends its asset purchase program in March, with three to four US rate increases anticipated in 2022.The US has an inflation problem caused by supply chain disruptions, labour shortages and strong consumer demand fuelled by turbo-charged monetary and fiscal stimulus.The real interest rate is negative 7 per cent.US wages have risen a robust 4.

The RBA can therefore readily see and quantify the impact of wage rises for a majority of workers under these transparent workplace arrangements. Yet, beyond these white-collar professionals and some baristas and waiters, so far, there is little evidence of higher wages flowing through to the vast majority of workers.

Hence, pending evidence of sustained and broad wage rises, a dovish RBA will not be spooked by firmer December quarter inflation.

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