The Reserve Bank board is set to make another tough interest rate decision in the fight against persistent but tempering inflation.
Board members will weigh up strong but somewhat unreliable monthly inflation data – which came in at 6.8 per cent in April, up from 6.3 per cent in March – as well as signs of an easing but still robust jobs market.
The central bank is also considering fresh wage data, which revealed pay packets growing at 3.7 per cent in the March quarter.
Wage growth alone is unlikely to worry the RBA, which is comfortable with wages hitting a peak of four per cent annual growth.
But governor Philip Lowe remains concerned about unit labour costs – the difference between wages growth and productivity growth.
Dr Lowe told a parliamentary hearing last week that sluggish productivity growth, not wages, was complicating the RBA’s job of returning inflation to target.
Some economists have also flagged the Fair Work Commission’s minimum wage decision as a possible cause for concern that could push pay packets higher than the RBA can manage.
On a backdrop of economic complexity and uncertainty, most experts agree there is a live debate between a pause and another 25 basis point hike when the RBA board meets on Tuesday afternoon.
A survey of 39 economists by comparison site Finder found slightly more than half expect the cash rate to stay on hold at 3.85 per cent.
Another hike will bring the cash rate to 4.1 per cent and mark the 12th interest rate hike since May 2022.
For mortgage holders, another 25bps would add an extra $1217 to monthly repayments, cumulatively, on the standard $500,000, 30-year home loan.
