A new measure of labour market slack (the LUCI) suggests that labour supply and demand are broadly in balance. Unexpectedly strong growth in labour supply, along with the characteristics of the migration cycle, substantially explains why wage and non-tradables inflation pressures have been weaker than expected.
Stronger than expected labour supply, and greater than expected slack, has been a factor in in our assessment that it has been appropriate to keep monetary policy accommodative. In view of the close relationship between labour market dynamics and inflation pressures, we will continue to monitor a broad range of labour market indicators to help inform our monetary policy decisions.