Finance

Wage growth remains stuck at record lows: ABS

Wage growth remains stuck at record lows: ABS

The slowdown has contributed to an unwelcome decline in underlying inflation, which is below the Reserve Bank of Australia's (RBA) target band of 2-3 per cent and has led to two interest rates cuts past year to a record low of 1.5 per cent.

"We actually took down the wage growth forecasts from what we had in December and they remain, as I said, in line with consensus forecasts in the country", he said last week, after emphasising that he understood the frustration of Australians experiencing low wage growth.

Total hourly rates of pay, excluding bonuses, rose by 0.5 per cent in the March quarter taking yearly wage growth to 1.9 per cent, according to the latest Australian Bureau of Statistics Wage Price Index.

As seen in the chart below, that would mark the first occasion that real wage growth has gone backwards since the June quarter of 2014.

The budget is also forecasting a continued acceleration in pay rises, with the wage price index predicted to rise to 3 per cent in 2018-19, 3.5 per cent the year after that and 3.75 per cent in 2020-21 - the year the budget is forecast to get back to surplus.

The consumer sentiment index dropped 1.1 percent in May to 98, its lowest since January and below a long-run average of 101.2.

With new album, Kendrick Lamar emerges as artist of the year
Kendrick Lamar performs at the Global Citizen Festival at Central Park in Manhattan, New York, U.S., September 24, 2016. In addition to his already sold-out July 27 concert, Lamar will return Sunday, August 20 with rappers YG and D.R.A.M.

Last month, the headline inflation rate rose to 2.1 per cent in the year to March 31, the first time in more than two years that consumer price rises have been within the RBA's target band of between two and three per cent. There were tentative signs of a turnaround in March, when 60,900 full time jobs were added, and other leading indicators of the economy have also generally been more encouraging.

The statistics bureau will release April employment data on Thursday.

The Reserve Bank of Australia has repeatedly expressed concerns recently that slow growth in wages, alongside high household debt levels, could weigh on spending.

"Nonetheless job security fears remain reasonably high".

Australia's employment picture has rebounded in recent months, with full-time jobs gaining at a steady rate. Not a single industry from manufacturing to healthcare raised wages more than 2.3 percent annually.

Through the year, the public sector rise to the March quarter was 2.4%, while the private sector rose just 1.8% - an equal record low.


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