/www.bloomberg.com/ By Tracy Withers
Sydney, Feb. 19 (Bloomberg) -- Australian wages growth slowed in the fourth quarter, easing pressure on inflation and raising economists' expectations the central bank will keep interest rates unchanged until mid year.
The wage cost index, which surveys hourly rates of pay, excluding bonuses, rose 0.8 percent from the previous three months, the Australian Bureau of Statistics said. That matches the median forecast of 17 economists polled by Bloomberg News. It follows a 1.3 percent gain in the third quarter.
The central bank said last week it expected underlying inflation was likely to remain at 2.5 percent over the next 18 months, which is below its 3 percent limit for annual consumer price increases.
``It would take two or more quarters of 1 percent-or-more growth to get wage inflation on the central bank radar,'' said Annette Beacher, economist at Salomon Smith Barney/Citibank Ltd.
The Reserve Bank has previously said annual wage growth of less than 4.5 percent poses little threat of inflation. Annual wage inflation accelerated to 3.4 percent from 3.3 percent in September, and may rise further as the unemployment rate is near a two-year low.
``Wage rises are probably still coming,'' said Beacher. ``The economy is not far off full employment.''
The jobless rate fell to a two-year low 6 percent in October, from 7 percent a year earlier, and was 6.1 percent in January, signaling the labor market is tight, she said.
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The economy added 128,000 jobs in the fourth quarter and 111,000 in January. The so-called participation rate, which measures the proportion of people in work or seeking jobs, rose to a record 64.7 percent.
The yield on the June three-month bank bill futures contract was 4.51 percent as of 12:20 p.m. in Sydney trading, unchanged after the report. That suggests traders expect interest rates to fall by the middle of the year. The Australian dollar bought 59.03 U.S. cents from 58.99 cents before the release.
The central bank has held its benchmark interest rate at 4.75 percent, just half a percentage point above a 30-year low, the past eight months.
That encouraged consumers and businesses to spend, driving annual economic growth last year of about 4 percent even as a drought cut farm production to its lowest in 20 years.
In a Bloomberg News survey of 17 economists last week, four said interest rates will be unchanged this year and six forecast a cut, one next month. Three expect borrowing costs will rise a quarter percentage point, three a half point and one expects the central bank's benchmark rate will be 5.5 percent by Dec. 31.