Pete Wargent blogspot


'Must-read, must-follow, one of the best analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Markets & Economics Editor, Sydney Morning Herald.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Wednesday, 17 May 2017

Wages growing at a snail's pace


Wages growth came in once again at 0.5 per cent for the quarter, leading to annual growth of 1.9 per cent, which is as low as we have seen over nearly two decades of readily available figures.

Since June 2014, wages growth has recorded increases of between 0.4 per cent and 0.6 per cent for 12 consecutive quarters. 

The Budget generously assumed that wages growth will rebound from here all the way up to 3.75 per cent over the years to come. 

Hmm, well let's hope so...and good luck with that!

Wages growth is still tracking ahead of underlying inflation - and so wages are growing in real terms - but only just. 

Overlaying the growth in public sector wages (2.4 per cent over the year to March 2017) we can see just how anaemic wages growth has been in the private sector (a record annualised low of just 1.8 per cent) over the last few years. 

Looking around the traps Tasmania (2.3 per cent) has rare bragging rights to the strongest wages growth, while Western Australia (1.2 per cent) has the weakest. 

The other states and territories saw wages growth grouping between 1.8 and 2.2 per cent.

The wage price index has not increased over the past six months from the September 2016 quarter in Western Australia. 

On the one hand this is lamentable, but on the other hand it's likely to be a necessary adjustment post-mining boom. 

In fact wages rose so hard and fast in Western Australia through the mining boom that the Golden state has been by far the strongest performer over the course of the data series. 

Mining is now the sector with the weakest year-on-year wages growth at just 1.2 per cent, while healthcare and social assistance, education and training, and public administration were jointly top of the tree with 2.3 per cent growth. 

Financial services wages were up by 2.2 per cent.

The wrap

Wages growth continues to kick along the bottom, probably at around the lowest levels in half a century in nominal terms.

Ordinarily this would have economists screaming for interest rate cuts, but nobody seems to care that much about the Reserve Bank missing its inflation target any more. 

With record low wages growth can certainly forget about any return to a Budget surplus until wages growth picks up. 

As you were!