Yesterday the Australian Bureau of Statistics released its wage price index which showed wage rises at a series low – just 2.6% over the past year.
After the recent uptick in Australia’s December quarter CPI and the RBA’s obvious concern about this increase, there was much applauding in the punditry and our inbox was assailed by positive comments that wage rises were low.
But TD Securities Head of Asia Pacific Research Annette Beacher has a different take on things:
Yes, at 2.6%/yr, annual wage cost index growth is the lowest on record (the series began in September 1997 with the auspicious index number of 66.6). But a casual glance at the comparison between employment growth and wages growth clearly shows that a slowing labour market results in slowing wages growth. This is independent of whether the employment is full-time or part-time or where we are in the business cycle.
While Beacher reckons that there are “grounds for optimism” in the labour market “with a substantial leap in skilled vacancies in January, also released today (+7%/mth (sa) in Jan)”, the point about a weak labour market she makes above seems to be behind the recent big falls in consumer sentiment.
It is something the RBA will be watching closely in the months ahead.