SYDNEY (Reuters) - Australia's labour market still has a "sizable degree" of spare capacity, a top central banker said on Thursday, despite a massive surge in employment since the start of this year.
The pace of job creation - 3.1 percent so far this year - is nearly twice that of annual population growth (1.6 percent). The number of jobs added in January-September was a sizzling 371,500.
Still, the jobless rate has remained stubbornly high at around 5.5 percent, with the underemployment rate - which measures workers wanting to put in more hours - near all-time highs.
The Reserve Bank of Australia (RBA) estimates the "non-accelerating inflation rate of unemployment" at 5 percent, meaning the labour market will need to tighten further before it creates a shortage for workers that lets them demand higher pay hikes.
The RBA does expect the spare capacity to gradually decline, Deputy Governor Guy Debelle said in a speech on Thursday entitled "Uncertainty".
But that does not necessarily mean a boost for wages.
Developed economies such as the United States and the United Kingdom have seen their labour markets tighten significantly but that has failed to lift pay rewards and, in turn, inflation, building the case for super-easy monetary policy globally.
In Australia, wages growth is crawling at the slowest pace to date while inflation has remained below the RBA's long-term target band for almost two full years, forcing policymakers to keep rates at a record low 1.50 percent.
Analysts suspect Australia might follow the global trend, in that wages and labour costs will remain benign even as the economy runs at full employment.
And the RBA will remain vigilant too.
"We will be alert to the possibility that these developments we see in other labour markets, in terms of subdued inflation in the face of minimal spare capacity, occur here too," Debelle said.
(Reporting by Swati Pandey; Editing by Richard Borsuk)
