Slower than expected wages growth could provide the impetus for the central bank to cut interest rates, economists say.

A softening job market, falls in productivity and inflation were suggested as reasons for the slower growth.

Wages in the September quarter rose by slightly less than the market was expecting, official data showed on Wednesday.

Total hourly rates of pay, excluding bonuses, rose by a seasonally adjusted 0.7 per cent in the September quarter, the Australian Bureau of Statistics said.

The median market forecast was for a rise of 0.9 per cent.

HSBC chief economist Paul Bloxham said the figures suggested a trend consistent with current slow rates of productivity growth in Australia.

“It looks as though wage growth is fairly contained,” he said.

“I think what you’re seeing is that wages growth has slowed, and it’s good for the inflation outlook.

“But with very weak productivity growth, we cannot sustain high wages growth as we used to have.”

Commonwealth Bank senior economist John Peters said the slower pace of wages growth fitted in with the recent downward track in underlying inflation.

“What it’s telling us is that in response to the slowing in the economy in the first half of the year and the consequent slowing in labour market conditions flowed through to softer wages growth,” he said.

“The tame wages growth is going to be no road block to further lower RBA (Reserve Bank of Australia) cash rates.

“That fits with our view that the Reserve Bank will drop the cash rate by another quarter of a per cent in the coming months.”

On November 1, the RBA cut the cash rate to 4.5 per cent from 4.75 per cent, citing easing inflation and volatility on global financial markets.

ICAP senior economist Adam Carr said the RBA’s monetary policy outlook would probably be largely unaffected by the data.

“Wage growth, whilst it’s accelerating, is still well below danger levels and I don’t think it would influence the RBA board either way.

“But, certainly, private sector wages are still rising at a reasonable pace.”

He said future cash rate movements would likely depend more on how Europe deals with its sovereign debt crisis rather than Australian economic data.

“If Europe goes down the toilet, we could get a series of rate cuts but if it doesn’t, the next rate move could be a hike.

“Really, the only major risk to the world is Europe and that’s not looking good.

“… but on paper, at least, it could be resolved.”

The Australian dollar and local bonds barely reacted to the ABS data, Mr Carr said.