15 May 2006

Wages rise in Australia

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The Bloomberg News agency is this morning reporting an increase of 1% in Australian wages in the first quarter of 2006.

The wage increase is being attributed to the country's skilled worker shortage forcing companies to pay higher salaries to hire and retain staff.

An increased demand in China for Australian commodities has fuelled hiring at mining and construction companies, causing further skills shortages and pushing up salaries. These rising wage costs have caused speculation that interest rated will increase in Australia for the second time this year.

One senior economist, Joseph Capurso, noted that unemployment in Australia is at a three decade low, so wages are going up. And because wages are companies' single largest cost, this will cause inflation to increase. As such, the Reserve bank of Australia, may consider another interst rate hike to stave off any further inflation.

Wages grew 4.2 percent in the year to 31 December, the fastest pace since 1997. Unemployment in Australia reached a 29 year low in March at 5% and increasing to 5.1% in April.

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