In an outcome that will do little to dispel the view that the Reserve Bank of Australia will follow up its May rate cut with another in the months ahead, Australian wage growth continued to slide in the first three months of the year, falling to the lowest level seen since at least 1998.
According to the Australian Bureau of Statistics wage price index — a measure on salary and wage movements among Australian workers — wages increased by just 0.4% during the March quarter, leaving the annual rate of growth at 2.07% after seasonal adjustments.
Markets had expected a quarterly increase of 0.4%, leaving the annual rate unchanged at 2.2%.
It was the lowest annual increase since the survey first began in 1998, and suggests that wages are now growing at the slowest pace seen since at least the 1990s recession.
According to the ABS, wages for the private sector — the largest employer in Australia — grew by just 0.4%, leaving the annual rate of growth at 1.91%, again a record low.
Those in the public sector saw their wages increase by 0.5% compared to the prior quarter, seeing the annual gain moderate to 2.46%.
By state and territory, Tasmania recorded the fastest quarterly increase in wages at 0.7% excluding seasonal adjustments. At the other end of the spectrum, wages in the Northern Territory grew by just 0.2%, the lowest level in the country.
From a year earlier workers in Victoria saw their wages grow by 2.4%, the fastest of any state and territory. The ACT, as was the case in the previous quarter, record the slowest level of wages growth at 1.8%.
For those looking for information in wage growth by specific industry, this excellent chart from the ABS reveals the quarterly and annual rates of change, excluding seasonal adjustments.
While the weak wage report does not provide a slam dunk case for the RBA to cut interest rates again as soon as June, it’s likely to enhance the view the a further interest rate cut is coming, most likely in August following the release of the June quarter consumer price inflation report from the ABS.
In a research note received prior to today’s release, Bill Evans, Westpac’s chief economist, suggested that a quarterly wage growth figure of 0.4% would “certainly unnerve the authorities”, reflecting the view that low wage growth could add to disinflationary forces that have been building in recent years.
Along with the negative impact low wage growth will have on inflationary pressures, it will do nothing to encourage an acceleration in household spending that many, including the government, expects will help underpin Australian economic growth in the period ahead.
Following the release of today’s weak wage report, all attention will now turn to the release of Australia’s official job figures for April on Thursday.
Though most analysts expect that the RBA will wait for the June quarter inflation report before reducing interest rates again in August, there is a belief in some quarters, particularly from those who called the rate cut in May well in advance, that a weak jobs report could prompt the RBA to ease policy again when they next meet on June 7.