A poor jobs market means wages generally won’t get higher for the next two years or so, according to estimates by the Reserve Bank.
The RBA, in its statement on monetary policy today, says weak wages growth remains consistent with a subdued labour market. The RBA’s outlook:
“Many firms expect to see a period of low and stable wage growth ahead. Wage growth is not expected to decline further, although pressure on public and private sector employers to contain costs means that wage growth is likely to remain low for some time and pick up only gradually towards the end of the forecast period (2017).”
Australia is in the middle of a flat period for pay. According to the latest official statistics, wage growth is at a 15 year low.
The ABS Wage Price Index has moved just 2.6% over 12 months.
That’s still beats the official inflation rate of 1.7% but is close to underlying inflation of 2.25%.
This means average wage growth is at, or close to, zero and will, according to the RBA, stay flat for some time.
Holding wages growth back is the unemployment rate, now at 6.1%, which the RBA expects to rise a little further and peak a little later than expected.
The RBA says this slow growth in labour costs, as well as the depreciation of the dollar rate since early 2013, is improving Australia’s international cost competitiveness.
“Business liaison that suggests employees appear to be willing to trade lower wage growth for greater job security,”the RBA says.