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Australia Q1 wage growth dragged by public sector

* Q1 wage price index 0.6% q/q vs 0.5% consensus

* Q1 wage price index 1.5% y/y vs 1.4% consensus

* Public sector wage growth at record lows

SYDNEY, May 19 (Reuters) - Australian wages growth picked up from record lows last quarter but was still nowhere close to the levels desired by the central bank, which has promised to not raise interest rates until inflation was sustainably within its target band.

The official wage price index rose 0.6% in the three months to end December, the Australian Bureau of Statistics (ABS) reported, slightly above forecasts for 0.5% increase.

Annual wage growth inched up to 1.5%, slightly above the record low pace of 1.4% in the fourth-quarter. The public sector recorded its lowest annual rate of growth at 1.5% while the private sector remained at 1.4% for the second quarter in a row, the data showed.

That is half the rate the Reserve Bank of Australia (RBA) has said is needed to generate inflation, meaning policy will need to stay accommodative for a long time to come.

Inflation has undershot the RBA’s 2-3% target for a number of years and the central bank’s forecasts suggest consumer prices won’t hit the range until 2024.

The RBA slashed interest rates three times last year to 0.1% and launched a massive quantitative easing programme to lower borrowing costs and boost inflation and economic growth.

The measures have helped prop up employment, consumer spending, house prices and the broader economy though price pressures are still elusive.

Wednesday’s data showed the March quarter saw a return to regular patterns of wage growth for the time of the year, supplemented to some extent by pay rises scheduled in the Fair Work Commission’s annual wage review of 2019/20, the ABS said.

In addition, “improved business conditions saw employers revisit wage reviews postponed during the height of the pandemic,” said Michelle Marquardt, head of prices statistics at the ABS.

The phased approach to the award increases saw jobs in the accommodation and food services, retail, arts and recreation, aviation and tourism industries receive rises previously recorded in September quarters, the ABS added. (Reporting by Swati Pandey; Editing by Sam Holmes)

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