ACTU Pulls Inflation Expectations Survey, Creating Potential Blind Spot for RBA

The Australian Council of Trade Unions (ACTU) has made a move that could create a 'blind spot' for the Reserve Bank of Australia (RBA). The ACTU has pulled a survey of inflation expectations, which the RBA relies on for rate decisions. This comes after the central bank argued that union long-term expectations of inflation were too high.

EQ Economics managing director Warren Hogan said the ACTU's move was 'entirely in their own interests' to support high-wage claims at the industrial level. He also stated that the unions are trying to avoid being seen as having high inflation expectations as a reason for the RBA to put up interest rates.

The minutes of the RBA's June meeting noted that union expectations were well outside the RBA's 2-3 per cent band, with long-term expectations of inflation sitting around 3.5 per cent. This is also above forecasts of market economists who predict inflation will sit around 2.5 per cent in the long term.

Mr Hogan said that the ACTU withholding inflation expectations comes as real wages have declined in recent years. He stated that this denial of information would reveal itself when those wage negotiations are settled, which could lead to higher interest rates.