General
RBA warns wages freeze may chill COVID-19 economic recovery
Australia’s economic resilience throughout the pandemic continues to surprise policymakers, with the Reserve Bank being forced to dramatically upgrade forecasts made just three months ago.
Key points:
- The Reserve Bank is only expecting wages growth to edge higher to 2 per cent by the end of its latest forecasts in June 2023
- RBA governor Philip Lowe has said wages growth of 3-4 per cent will be needed to lift inflation back to the 2-3 per cent target
- The RBA has fingered public and private sector wage freezes and caps as contributing to the forecast weak outlook
The bank expects the decline in Australia’s economy over 2020 to be less than half what it was predicting in its November forecasts — a 2 per cent fall versus 4.5 per cent.
However,…
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