A diabolical problem for the Australian economy, in one neat paragraph

The Scream. Photo: Getty / File

Via Stephen Roberts, chief economist at Melbourne’s Alexander Funds management (emphasis added):

… if the current trends in Australia’s labour market – soft employment growth driven by part-time jobs’ growth; falling hours worked; low and still declining wages growth – continue, as seems likely, inevitably the increasing constraint on growth in household disposable income will lead to fading growth in spending on housing and in retail stores. This outlook still implies more RBA cash rate cuts ahead. Until the labour market takes a marked turn for the better, it is hard to see how there is any other policy option.

Roberts highlights the insidious nature of not just the softer labour market, but also this current period of weakening wages growth, which is unprecedented in recent history. Low wages growth suck for all sorts of reasons: at an individual level, because pay increases get eaten up by inflation, and across the economy companies – employers, that is – see less enthusiastic and ebullient customers coming through their doors.

David Scutt has taken an extended look at the wages market here.

And the full article from Stephen Roberts is here.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.