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

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Wednesday, 18 November 2015

Wages +2.3 per cent

Part 1 - Wages growth sluggish

The Wage Price Index figures for the September 2015 quarter revealed another +0.6 per cent increase in hourly rates of pay excluding bonuses for a subdued annual growth of +2.3 per cent, with mining and resources construction remuneration having weakened considerably in recent years. 

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Employment growth has been surprisingly strong at +315,000 over the past year on a seasonally adjusted basis (trend basis +260,500), but despite an apparent decline in the unemployment rate there remains a good deal of slack in the labour force and wages growth is expected to be subdued over the next couple of years.

At the national level public sector wage increases (+2.7 per cent) have diverged from private sector gains (+2.1 per cent).

Part 2 - State versus state

At the state level the resources states in particular have seen wages growth slowing from the elevated levels seen through the mining boom. 

Rationalisation in Canberra sees the Australian Capital Territory with stalling public sector wages, and correspondingly the weakest annual rate of wages growth in the nation.

Over the past decade the dominance of wages growth in the resources states is clear, with Western Australia (+52 per cent), Queensland (+44 per cent) and the Northern Territory (+44 per cent) seeing the strongest gains on their wage price indices respectively.

While for whatever reason it suits some folk to pretend that wages are "falling", it is worth noting that in nominal terms this is far from being the case - in fact wage price indices are at their highest level in all states and territories. 

The present rate of inflation or CPI is +1.5 per cent.

Part 3 - Industry groups

Perhaps unsurprisingly there is comparative wages price weakness in the mining (+2.1 per cent) and construction (+1.7 per cent) sectors, reflective of the ongoing mining capital expenditure collapse.

The strongest performing sectors for wages growth over the year to September were education (+3.0 per cent) and finance and insurance (+2.7 per cent).

The wrap

Overall, nothing particularly unexpected here, with the rate of wages growth expected to remain soft for the foreseeable future, having declined from an annual pace of above 4 per cent through 2007 and 2008.

The headline employment growth figures may appear robust enough, but soft wages growth suggests a persistent level underemployment in addition to part-time jobs and an ongoing casualisation of the workforce.