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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Wednesday, 24 February 2016

Mining and construction wages sliding

Wages growth slow

The ABS released its Wage Price Index data and it was another slow quarter across the three months to December 2015 with +0.5 per cent growth following on from +0.6 per cent growth in the September quarter. 

This took annual wages growth down from +2.3 per cent to +2.2 per cent in the fourth quarter, which is the most lacklustre result since this data series commenced in 1997.

Over the year to December public sector wages grew at a considerably stronger +2.6 per cent than the +2.0 per cent recorded for the private sector, where the resources construction slowdown continues to bite.

The mildly positive news is that there should be little in the way of inflationary pressures on this evidence, thereby allowing interest rates to stay low, and slower wages growth should hopefully also help to keep some downward pressure on unemployment. 

Wages growth of +2.2 per cent also remains double the increase in the cost of living for employee households, which (apparently) increased by only +1.1 per cent in the calendar year. 

The downside to weak wages growth is that, um, we don't get very good pay rises! 

Which is not so terribly good for consumption growth. 

Wages and construction wages slide

Even without looking at the figures you'd likely suspect that mining (+1.5 per cent) and construction wages (+1.6 per cent) have been soft as the resources construction bust continues on its not-so-merry way, and your suspicions would be confirmed as correct.

The sectors within which wages are improving include financial services (+2.8 per cent) and education and training (+2.6 per cent), the latter being a sector thriving in the lower dollar environment and following the simplication of visa rules for surging volumes of international students

At the state level the strongest annual wages gains were recorded in Victoria (+2.4 per cent), the Northern Territory (+2.4 per cent), and South Australia (+2.3 per cent).

Queensland (+1.9 per cent) and particularly New South Wales (+2.1 per cent) have been adding jobs at a furious pace according to recent data, but wages growth suggests that not employment gains are not necessarily in healthily paid positions.

The weakest annual wages growth was seen in the Australian Capital Territory at +1.6 per cent. 

Finally, tracking back to the beginning of the data series shows that the strongest wages gains over the past 18 years have been seen in...Western Australia. 

The wrap

Overall, another weak quarterly headline result for wages growth, a trend which appears likely to continue for quite some time to come.