We look at the current 6.2% unemployment rate relative to its “normal” level or NAIRU. As the NAIRU has fallen over the past 30 years, there is more downward pressure on wages currently than any time in the past two decades. At best we see wage growth in the 2½-3% area over the next year or so and the risk is for even weaker wage outturns and further cuts in real incomes. RBA on hold for a long time – market still pricing next move to be a cut. Our FX Strategy team have revised their $A forecast lower – now see sub US 80cents.
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