Governor of the Reserve Bank of Australia (RBA) Philip Lowe has echoed his bet he won’t need to hike interest rates until 2024, stating unemployment needs to be reduced to fuel wage gains.

As such, traders will be focused on Thursday’s labour market report. Economists forecast employment to have risen by 50,000 last month, yet the jobless rate likely rose to 4.8%.

The central bank says it will take a minimum of two more years of ultra-low rates to return inflation to the 2%-3% target. However, traders view this as overly dovish, saying the RBA could start tightening by May.

“We have become more upbeat about the Australian economy,” according to Belinda Allen, a senior economist at Commonwealth Bank of Australia, which forecasts the first hike in November 2022. “It’s not only inflation coming through earlier, the labour market is improving faster and consumer spending is picking up.”

Moreover, as per the results of a National Australia Bank survey published on Tuesday, the number of businesses having difficulties in finding suitable employees was the highest since the mining boom of the last decade. Data on Monday also revealed skilled job vacancies reached a 13-year high in October, says a BNN Bloomberg report.

The central bank governor added that wages likely need to be increasing at 3% for inflation to reach the RBA’s 2.5% target midpoint, which isn’t expected until the end of 2023. According to the most recent official data, annual wages grew 1.7% in Q2. The Q3 report is due next week.

In contrast, the Commonwealth Bank’s senior economist forecasts wages to increase faster than the central bank predicts. However, others are not as confident. Morgan Stanley says 3% pay gains are quite a long way off, taking into account around 60% of salary agreements are based on long-term contracts.