Data released this week suggest that the RBNZ's concerns about the stickiness of homegrown inflation are overdone. Indeed, non-tradables inflation undershot the Bank's expectations for a second consecutive quarter in Q4. Moreover, with unit labour cost growth set to keep falling rapidly, we believe the slowdown in non-tradables inflation has much further to run. Meanwhile, in Australia, there are signs that there may be more slack in the labour market than meets the eye. With job mobility continuing to fall sharply, our new composite measure of labour market tightness suggests that wage growth could soon drop to a level where the RBA is concerned about inflation undershooting the mid-point of its 2-3% target.
Note: We'll be discussing the Australian Q4 CPI release and its implications for the policy outlook and financial markets in a Drop-In on
Wednesday, 29th January. Register here for the 20-minute online briefing.
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