This passage is very interesting. Note where the Gov says he is happy and not so happy apropos wage growth, and how he ties it to the underlying CPI forecast. I think the RBA wants to see it forecasts vindicated before it goes again.
"Mr Stevens —The public sector does not tend to have a great deal of cyclical variation. In the chart there the private numbers at the peak before they went down were at four or 4½ as well. The private sector is more cyclically responsive. I think that has long been true. Three and a half per se across the economy on average in the private sector is not inflation breakout territory. So if it stays there I do not think we have got a problem with overall price pressures. We have got five per cent unemployment as of the January figures that came out yesterday. If our forecasts are right, that will edge down over the next couple of years and we would expect to see overall private wage growth go up some more from where it has been. That is part of the gradual increase in underlying inflation we are talking about."
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