Wages growth decelerates

Down payment blues

Wage price growth was just +0.5 per cent in the September 2019 quarter, and a rather desperate +2.2 for the year, which represents a disappointing (if not exactly surprising) deceleration.

Year-on-year wage price growth was dragged along by public sector wages growth of +2.5 per cent.

But quarterly wage price growth in the private sector is now running even more slowly than it was at the end of 2018. 

The only state which looked at though it might have a positive effect on wage price growth with a tightening labour market in the private sector was Victoria.

But even this hopeful trend seems to have lost momentum now as construction hiring drops away.

At +2.8 per cent Victoria held onto the title of 'fastest' wage price growth. but overall the picture was very subdued, and now slowing. 

There's been some mean reversion for the resources states, with wages in Western Australia growing by just +1.6 per cent. 

Across the sectors the strongest annual wages price growth was in healthcare and social assistance at+3.2 per cent, and the slowest was in information media & telecommunications at +1.7 per cent.  

Wage price growth in both the retail and construction sectors was fairly dire, at just +1.9 per cent. 

If you dig deep and hard enough you can usually find something positive (or negative) to say.

And this quarter - with a bit of help from the base effect - private sector wages including bonuses increased by just shy of +3 per cent.

But overall the hope that a tightening labour market in Victoria would drive wages higher has faded, while New South Wales wage price growth of +2.2 per cent is anaemic. 

Prosperity and welfare

Productivity has fallen, and market measures of long-term inflation expectations have cratered, so a deceleration in wages growth probably shouldn't come as much of a surprise to markets.  

The Phillips Curve is shifting lower, and flattening - full employment is probably at a guess somewhere closer to 4 per cent based on international experience and through casually observing Australian statistics.

Yet there's still stacks of underutilisation and no apparent reason for this dynamic to improve. 

To be fair, let's see what tomorrow's labour force figures bring to the party, but with well over 700,000 unemployed and inflation below target the economy could be allowed to run faster than this.