Wages growth in Australia is still pathetic

Photo: iStock.

Australia’s December quarter wage price index has been released, and, for the first time in many years, wage growth hasn’t fallen.

According to the ABS, hourly rates of pay excluding bonuses grew by 0.48% for the quarter in seasonally adjusted terms, leaving the annual rate at 1.87%.

Both readings were in line with market expectations.

Despite the modest pickup over the quarter, the year-on-year increase was still the lowest level on record, coming in marginally below the 1.88% level of the September quarter.


By sector, private sector wage grew by just 0.4% — the second-lowest quarterly increase on record — leaving the annual rate at 1.8%, below the 1.89% pace of the previous quarter.

Like the headline rate, it was the lowest annual growth on record.

Not great news considering the private sector is the largest employer in the country.

Among private sector workers, the ABS said wages in New South Wales grew at the fastest pace across the country during the quarter, increasing 0.4% in original terms. Those in Western Australia grew by a paltry 0.1%, the lowest rate of all states and territories.

Public sector workers fared better than their private-sector peers, recording a quarterly increase of 0.55%. That was almost unchanged from the previous quarter and left the year-on-year increase at 2.25%.

That too was a record low, if only by a whisker.

Wages for public servants in Queensland recorded the highest quarterly increase of all states and territories during the quarter at 1.3%. At the other end of the spectrum, those in New South Wales grew by just 0.2%, the lowest in the country.

The ABS said the timing of pay increases awarded under enterprise agreements influence quarterly wages growth in the public sector.

By industry, the ABS said that annual wage growth, in original terms, ranged from 1% for mining to 2.4% for health care and social assistance and education and training, an outcome that fits with recent patterns in employment growth.

This chart from the ABS shows the quarterly and annual change in wages by specific industry in original terms. The scale used in the X-axis is probably an appropriate reflection on just how far wage growth has fallen in recent years.

Source: ABS

The market reaction to the report has been almost non-existent, something that is not all that surprising given many — including the RBA — have said that there were signs that wage growth had or was nearing bottoming.

However, the continued weakness in private sector wages will warrant close monitoring in the first half of this year, particularly as the RBA’s growth and inflation forecasts are premised on an expected modest pickup in wage growth in the years ahead.

There’s little evidence in this report that is occurring as yet, and with labour market slack still in abundance, any further slowdown in employment growth will only create further doubts over the ability of households to stir growth and inflationary pressures through increased consumption in the years ahead.