Capital economics: Raising the minimum wage has strengthened the case for the Australian central bank to raise interest rates.

Abhijit Surya of Capital Economics said that Australia's increase in the minimum wage by 4.75% has strengthened the central bank's case for raising interest rates again in the quarter ending in September. Despite market pricing suggesting August as the most likely timing expectation, the senior economist for the Asia-Pacific region remains firm in his prediction of a further 25 basis point rate hike. Surya acknowledged that the direct impact of the minimum wage increase will be modest, but he pointed out that the Reserve Bank of Australia's analysis indicates that such decisions will affect wage-setting in other areas. He added that the possibility of overall wage growth exceeding the Reserve Bank of Australia's expectations now appears more likely.