Stronger wages growth is something that the RBA had been seeking for a number of years and some pick-up is welcome. It is also important to note that, to date, the stronger growth in wages has not been a major factor driving inflation higher and, at the aggregate level, growth in labour costs remains consistent with inflation returning to target.
Today’s uneven pattern in global trade and capital flows is being accompanied by a massive accumulation of foreign exchange reserves – mostly in these Asian or oil-exporting surplus regions. This reveals that the unprecedented accumulation of foreign exchange reserves, following large current account surpluses in many emerging market countries, is as much a part of global imbalances as is the US current account deficit.